The emotional effects of debt


I was reading somewhere that the average American has $15,950 in credit card debt, and 39% of Americans carry credit card debt month to month, which is huge I guess, without taking into consideration the loans issued from commercial banks or other financial institution.

In Kosovo with 1, 7 million inhabitants the amount of issued loans in the beginning of 2014 was € 1.86 billion (including personal loans, mortgages and business loans), whereas every working person at least has one credit-card (over 50% of the population). For you a loan of 1,058 €/person might not sound that bad, however the if we consider that the average interest rate in Kosovo is 11% compounding, this is huge burden for Kosovo citizens with the unemployment rate of 44% .

Although the latest report of the Kosovo Central Bank is showing a decrease in the loan value disbursed, it is mainly a decrease in business sector, due to the political and economic crises in place, and another very important unspoken reason is that personal loans have lower interest rate therefore small business purchase personal loans for their business purposes.

Nevertheless, one way of another, a loan weather is it for a ‘good’ purpose (buying a new car, house, going into vocation, etc) or ‘bad’ purpose (survival, sickness, etc) causes serious emotional effects. Dr. John Gathergood, studied the debt and depression correlation in 2012, and published an article about it in the Economic Journal (you can download full article here). He has shown us that the ones who cannot pay their debts and loans are twice more likely to experience any kind of health problems (emotional problems, such as depression and severe anxiety), compared to the rest of the population.

In Kosovo currently the non-performing loans account only for 8.7% which is the lowest in the region (Balkan countries), which also shows that we are willing to pay our loans before ensuring other basic needs per month (such as food), and this is another reason why banks are so profitable in here. However I must add the percentage of 8.7% was only 2.5% back in 2011; respectively people every day are getting poorer and unable to pay their debts. This also led to the increasing number of drug users, alcoholics and suicides, and unfortunately there is more to it: problems with debt effect also our marriage, children, job and friends.


Some people, especially in Kosovo, find denial as the best solution to not pay a loan/debt. Denial might seem a momentary solution, because it just leads you deeper into debt: Not paying your loan means additional interest rate per day, it also means not having control over your debts, spending more, and sometimes losing more (e.g. house, car, etc. if you had to provide capital insurance).

Stress from debt is the most common emotional effect we get from loans, it is so powerful that is eliminates all happiness we get from spending money (buying food, cloths, dresses, etc), because we are constantly focused on ‘how much we spend’, or ‘how much would we be left with’. All this often translates into anger and frustration, and a constant reminder of the negatives in our life.

Other common negative emotiona we feel when we are in debt are also: Regret – for the good we purchased or an investment we did; Shame – because we are not earning enough; Fear – losing our job, family and friends; Anxiety – not being able to save for ‘black days’;…and much more.

Therefore before we purchase a loan we might want to use a ‘30 day’ rule, respectively leave the idea where it is for 30 days and come back later and see if you still need/want to purchase the good, e.g. buy a house and/or that particular house, or you want to re-consider you initial idea and let’s say buy something cheaper.

There are plenty of ways how we can help ourselves to stay away from loans, or take as less as we have to, we just need to read about it and speak about it. My suggestion for you that would like to read more about this topic is to start reading financial blogs, e.g. is a great start.


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