The Debt Consolidation Story;
The financial counselling Myth;
debt management in Canada has become a reasonable solution for dealing with debt but could not be the right solution for people to administer their debt. In most cases individuals will apply for debt consolidation loans to pay off their unsecured debt and begin with a new slate. even though this takes care of the current problem it typically causes bigger circumstances later on in life. There are two reasons why this happens.
First off, people are creatures of habit. By obtaining a consolidation loan you’re only covering up the essential problem, your habits. Although a consolidation loan will satisfy your initial debt it wont deal with your spending habits. Usually People obtaining consolidation loans to pay off their debt end up with twice the debt they started with.
This is the other reason consolidation loans do not pan out. Once people eliminate their credit cards or lines of credit it gives them access to unsecured debt, causing the cycle to start over again. Often times people end up with their unsecured debt maxed again, as well as, the consolidation loan that they were issued in the first place. The most common statement I hear as a debt manager is “I need to attain a debt consolidation loan to repay my accounts”, “I dont want to use unsecured debt again”. In theory this is fabulous but more often than not this doesn’t happen
Unless an individual is prepared to tackle their overall problem (i.e. their spending habits) they will not succeed with a debt consolidation loan. In actual fact this is one of the main reasons that the banks have stopped issuing debt consolidation loans. They have, for the most part, stopped this because they recognise that this is only feeding the problem and not solving the problem. If you truly want to deal with your debt, cut up your credit cards, stop access to any revolving credit, make your monthly payments to pay the debt down and track your spending. It is only through the tracking of your spending habits that you will truly understand the fundamental issues of your debt. In order to deal with your debt problems, you must first understand how you got there in the first place.
If you want to live debt free you must recognise your unnecessary spending habits and make changes to eliminate them from your life. If you were to ask me what lesson I teach my clients the most, it’s how to track their spending and identify unnecessary spending.
Greg Martin
Credit Advisor
Inspire Credit Counselling Services
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