The Debt Management Fantasy;
Debt Consolidation in Canada has become a approved solution for dealing with debt but may not be the right solution for Canadian’s to handle their debt. In a growing number of cases individuals will apply for consolidation loans to control their unsecured debt and begin with a clean slate. even though this takes care of the current problem it often creates much larger problems later on in life. The reasons why this happens are;.
First off, individuals are creatures of habit. By applying for a debt consolidation loan you’re only masking the essential issue, your habits. Although a debt consolidation loan will repay your primary debt it wont deal with your spending habits. Usually People getting consolidation loans to pay off their debt end up with twice the debt they started with.
This being the second reason debt consolidation loans do not pan out. After individuals eliminate their debts it gives them access to available funds, allowing the trap to start over again. Often times Canadian’s wind up with their un-secured debt maxed out again, as well as, the consolidation loan that they were issued to pay off their debt. The most frequent comment I hear as a credit counsellor is "I want to secure a debt consolidation loan to repay my debt", "I do not want to use unsecured debt 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
Inspire Credit Counselling Services