Most people, when they get a debt consolidation loan, do so without having changed their spending habits. People in general, have a tendency to get into debt consolidation programs, and getting all their debts consolidated into own lower monthly payment (and lower interest). Then, instead of saving the extra cash they once again go on a spending spree. Taking out more credit, and thus getting their selves in a worse bind. Look, the problem with debt is not going to get any better until they change their spending habits. Her are the simple facts:
- Live on less then you earn You cannot go around like the politicians in Washington, D.C. and spending more then you make. It just does not work. Plain and simple! As Abraham Lincoln said, “You cannot keep out of trouble by spending more than you earn.”
- You have to set aside a savings This really goes hand in hand with the first item (live on less then you make). You have to save for future emergencies. Over the course of time, you have to build a savings equal to at least 3-6 months of your income (12 months or more would be even better). However, you also need a retirement savings. Not to mention savings for all your big purchases (house, car, new TV, new computer, vacation, etc). Like grandma used to say, "If you can't pay cash for it, you don't need it."
Now the ugly, A new report issued by Franklin Debt Relief CEO, Robert Zangrilli, to the FTC, titled “Common Sense,” shows that based on statistics from both debt settlement and credit counseling industries (the credit card debt settlement companies and credit counseling services) that debt settlement produces more consumer welfare than credit counseling, and in fact, consumers who use credit counseling programs that eventually file bankruptcy lose more money in non-refundable payments to creditors than consumers who complete their plans save from interest rate reductions. There may be some truth to Mr. Zangrilli's findings, but I also find it suspect. Especially since it is in favor of his industry, rather then the counseling services. What I want to know is, who conducted this study? Did this study include both legitimate and ripoff counseling services, or did stick to only those non-profit counseling services that DON'T advertise on late night television? There are two many questions left unanswered by this so called study. Every site that claims to be quoting this study, say it was only the non-profit counseling services, but since I can't find an independent third party, I have to continue find this study suspect.
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