The credit counselling Fantasy;
The debt management Fable;
financial counselling in Canada has become a reasonable method of handling debt but might not be the proper solution for individuals to handle their debt. In most cases clients will look for debt consolidation loans to eliminate their credit card debt and begin with a new slate. Although this takes care of the initial problem it generally creates much larger circumstances . There are two reasons why this happens.
First off, individuals are creatures of habit. By a consolidation loan you’re only avoiding the underlying issue, your habits. Although a debt consolidation loan will pay back your original debt it does not deal with your spending habits. Generally speaking People applying for debt consolidation loans to pay back their debt end up with twice the debt they began with.
This being the other reason consolidation loans won’t help. After people pay back their debts it allows them access to available funds, causing the process to repeat itself again. Usually Canadian’s end up with their account maxed out again, as well as, the consolidation loan that they took out in the first place. The most common phrases I hear as a credit counsellor is “I want to secure a consolidation loan to re-pay my debt”, “I dont want to use unsecured debt again”. In theory this is superb 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
Credit Advisor
Inspire Credit Counselling Services
