The financial counselling Fable;
financial counselling in Canada has become a common method of dealing with debt but may not be the advisable solution for Canadian's to control their debt. In a growing number of cases Canadian's will seek out debt consolidation loans to pay off their un secured debt and begin with a clean slate. Although this takes care of the initial problem it typically creates bigger issues . The reasons why this happens are;.
First of all, people are creatures of habit. By a debt consolidation loan you are only avoiding the underlying issue, your habits. Although a debt consolidation loan will repay your primary debt it doesn’t deal with your spending habits. Usually individuals getting debt consolidation loans to pay back their debt end up with twice the debt they began with.
This being the second reason consolidation loans do not work. After Canadian's pay back their credit cards or lines of credit it gives them access to available funds, causing the process to start over again. Usually people wind up with their account maxed out again, as well as, the debt consolidation loan that they borrowed to pay off their debt. The most typical phrases I hear as a credit counsellor is "I need to attain a debt consolidation loan to re-pay my debt", "I do not want to use revolving credit again". In theory this is great 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
Debt Manager
Phoenix Credit and Debt Counsellors
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