Fundamental Problem With Debt Consolidation

by The Happy Rock on November 19, 2008

treading-water-problemPutting debt on a 0% credit card or rolling high interest debt into a home equity line of credit may help save you money in the short term, but it is only addressing the symptom.  The symptom is the debt; the debt isn’t the problem. The behaviors and attitudes that got you into debt are usually the problem.

Imagine a couple in a pool flailing around unable to swim or even tread water.   You through them a lifeline and they are saved.  The trick is though that they only stay saved if they don’t go into the water again.   Unless they learn how to swim they are going to continue to have the same problems if they go in the water.

The same is true for money, although unlike avoiding water we can’t avoid spending, earning, and needing money.    The only other option is to learn how to swim.  We need to change our relationship and behavior towards money.  Debt consolidation often helps people escape the symptoms of their problems without having to actually address the issues.  Bankruptcy and bailouts usually have similar deleterious effects.  People who roll their credit card debt into a second mortgage often find themselves with credit card debt again and now they have a second mortgage to boot.

The way issues get addressed is often by hitting rock bottom or the end of your preverbial rope and coming up with a real desire to change your behvaior and your financial destiny.   Feeling pain promotes real change. Watching other people suceed inspires change.  Hard work, discipline, and repitition change behavior. Focus on the problem not the symptom.  Fix the problems and the symptoms will go away with some hard work.

{ 6 comments… read them below or add one }

The Debt Defier November 19, 2008 at 1:24 pm

So far the only debt we’ve consolidated have been student loans. But I know some folks who did what you alluded to, even as they were outwordly professing their desire to become debt free.

Looking back I think they had a Dave Ramsey moment. They were going to downsize their lifestyle and help their kids with college expenses.

But the moment was fleeting. After talking to their banker they refi’ed their house and soon they bought a new truck, a convertible, two scooters, and upgraded their RV.

They don’t talk about getting out of debt anymore.


ChristianPF November 21, 2008 at 12:54 pm

” Focus on the problem not the symptom. Fix the problems and the symptoms will go away with some hard work.”

very well said. This is so true in almost every area of our society. We are way too focused on fixing symptoms rather than getting to the root of the problem.


The Happy Rock November 24, 2008 at 1:44 pm

@ChristianPF – I think you are right. The symptoms are usually easier and more tangible. Fixing the cause usually requires more effort, change, and more humility.


Bankruptcy Regina December 30, 2008 at 4:22 pm

Great article! We take the same approach in communicating these valuable facts to our clients. I have bookmarked this post and will share it with the rest of my team.


Jonathan Browne January 2, 2009 at 5:33 pm

Absolutely, the true key to getting out of debt is stopping an addiction to spending on unneeded items and make a commitment to lower monthly expenses.

read my article on addictive spending here


Moneyman January 21, 2009 at 8:29 am

Credit card debt is taking over the country, and most people are charging more due to the recession. This is not uncommon, however, the time is going to come when it is time to repay all of those debts and when that happens, hopefully those of you who have charged more because of lack of money will have what you need to pay off the debt. However, if you are one of the millions of Americans who find yourself in a difficult situation when it comes time for payback, then it is time to collect debt consolidation information from whatever sources that you can find.

When considering what debt consolidation information to use, the first thing that you should do is consider the source. Where did you get the information that you are using, is it an official source? You can get a lot of information about debt consolidation on government websites, which are very reliable sources in the respect that their information will be unbiased and will not direct you to a specific company to use for your debt consolidation.

You will learn in detail from your debt consolidation information about the two different kinds of debt consolidation, credit card consolidation loans and credit counseling services. These are two very different programs, where taking a loan means just that, however, if you have a lot of debt or bad credit you may have to use your home as collateral or get a co-signer to get the loan, which may not be idea. Credit counseling services mean that you allow a company to negotiate with your creditors for lower payments and to eliminate your interest. The downside here is that you have to close all credit accounts or the credit counseling service will not work with you, also, this does show up as a negative on your credit report, although not as negative as not paying your debts.

There are a couple of other options that may not show up in your debt consolidation information like credit card debt settlement, which is paying a company to negotiate lump sum payments with your creditors at a value less than what you owe. Another is to just do it yourself, without the help of any companies. The upside here is that your credit is not affected if you continue to make payments on your accounts. The ultimate goal for any of these plans is to pay off your debt as quickly as possible.



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