The financial counselling Myth;
Debt Consolidation in Canada has become a general method of dealing with debt but could not be the proper solution for people to control their debt. In a growing number of cases clients will look for debt consolidation loans to control their debt and start with a clean slate. Although this takes care of the initial problem it repeatedly developes much larger problems down the road. There are two reasons why this happens.
First off, individuals are creatures of habit. By getting a consolidation loan you're only covering up the primary problem, your habits. Although a debt consolidation loan will satisfy your original debt it doesn’t deal with your spending habits. Generally speaking Canadian's getting debt consolidation loans to pay off their debt end up in twice the debt they began with.
This being the second reason consolidation loans do not work. Once individuals pay off their revolving credit it gives them freedom to revolving credit, causing the process to start over again. Usually individuals end up with their un-secured debt maxed again, as well as, the debt consolidation loan that they were issued to pay off their debt. The most frequent comment I hear as a debt manager is "I need to get a consolidation loan to repay my debt", "I don't 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
Debt Consolidator
Phoenix Credit and Debt Counsellors
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