The debt management Fantasy;
In Credit Repair of CreditGuru (September 24, 2008 12:46 am)
The Debt Consolidation Fantasy;
financial counselling in Canada has become a general method of handling debt but could not be the appropriate solution for individuals to control their debt. In a growing number of cases Canadian’s will apply for consolidation loans to pay off their debt and begin with a clean slate. even though this takes care of the short term problem it oftentimes developes much larger problems . The reasons why this happens are;.
First off, individuals are creatures of habit. By obtaining a consolidation loan you are only avoiding the vital issue, your habits. Although a debt consolidation loan will pay back your primary debt it does not deal with your spending habits. Commonly Canadian’s applying for consolidation loans to pay back their debt end up with twice the debt they began with.
This being the other reason consolidation loans will not help. Once individuals pay back their revolving credit it allows them freedom to available debt, causing the issue to start over again. Often times Canadian’s end up with their unsecured debt maxed out again, as well as, the debt consolidation loan that they were issued in the first place. The most familiar phrases I hear as a debt manager is “I want to get a consolidation loan to repay my accounts”, “I do not want to use revolving credit again”. In theory this is fabulous 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
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