The Last Loan

We wanted to write this blog because we often see patterns regarding triggers for serious financial problems and clear points in time where different choices could have changed the course of the problem. Sure, there are instances where a sudden occurrence, such as a job loss or divorce, can cause abrupt and unexpected financial turmoil, but more often than not people build their financial problem over time.

This is evidenced by just about every news publication reporting that Canadians are carrying a dangerously high level of personal debt. Over time debt accumulates like a snowball.

Example scenario:

·         It only takes using those credit cards too much one month to push you into a situation where you can’t pay in full and so you make a smaller payment.

·         Eventually you have a few cards with small balances so you decide to get a line of credit to consolidate them – only you keep using the cards once you’ve paid them off.

·         Finally you decide that enough is enough - you get a consolidation loan at the bank to pay the line of credit and the credit cards.

·         You go a couple of months without using the cards but then your transmission goes. You think, well, you will only use the card once, but this means the cycle starts again…

·         A year later, you have the consolidation loan and a balance on the line of credit and a couple of credit cards.

·         You have accumulated some equity in your property, so you decide to get a second mortgage to pay off all the debt one final time. You are successful in doing so.

·         However, in the end, just like with the last consolidation loan, a few months later you begin using your cards again and a year later you find yourself making a slew of minimum payments on your credit cards.

Now you reach a pivotal point – another loan? We say no! Let your last loan be the last loan.

Just as Einstein said, the definition of insanity is doing the same thing over and over again and expecting different results. If you continue to refinance and restructure your debt year over year, each year owing more, you will be caught in a cycle that is not going to break unless you win the lottery or get a major raise at work (and how likely is either one of these?).

There comes a time when one must say “self, I need to get some professional help”. Just like you may go to a therapist for a personal problem or a lawyer for a legal problem, one who continues to struggle with accumulated debt also benefits from professional guidance.

Stop the insanity! Maybe there is a quick fix and some help with budgeting is the answer, or perhaps you have really dug yourself into a hole and need some major intervention. Either way, you are going to need to do something very different to break the financial cycle you are in.

If you would like to make your last loan your last loan and need financial guidance DebtCare Canada can help. Call us today 1-888-890-0888.