The Debt Consolidation Story;
financial counselling in Canada has become a trendy method of dealing with debt but may not be the right solution for Canadian’s to administer their debt. In a growing number of cases clients will look for debt consolidation loans to control their un secured debt and start with a clean slate. even though this takes care of the initial problem it routinely causes greater problems . There are two reasons why this happens.
First off, people are creatures of habit. By getting a debt consolidation loan you are only covering up the vital issue, your habits. Although a debt consolidation loan will clear your primary debt it doesn’t deal with your spending habits. Commonly Canadian’s getting debt consolidation loans to eliminate their debt end up in twice the debt they started with.
This being the other reason consolidation loans don’t help. Once Canadian’s pay back their revolving credit it allows them access to available funds, causing the issue to repeat itself again. Usually individuals end up with their un-secured debt at the limits again, as well as, the consolidation loan that they borrowed to eliminate their debt. The most generic comment I hear as a debt manager is “I need to obtain a debt consolidation loan to repay my accounts”, “I do not want to use credit cards again”. In theory this is wonderful but often times 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 Counsellor
Phoenix Credit and Debt Counsellors