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Driving Down Debt: A Key to Pursuing Long-Term Goals

As you prepare to hit the busy highways this holiday weekend, consider the road ahead. It takes a lot of planning to travel, but no trip is without its bumps in the road. The road to financial stability is no different. If you want to do more to prepare financially for the future but find yourself slowing behind debt, here are some ideas for plotting a clearer route.

Consolidate credit: First, look over your bills and pay as much as possible toward the cards with the highest interest rates and the minimum on the lowest rate cards. You can also transfer your balances to one card with a lower rate. Another option is a debt consolidation loan. Carefully review the loan terms -- even if you end up with lower monthly payments, a longer repayment period could cost you more over time. A home equity loan is another possibility, but you'll need to think through the costs carefully. Remember, the point of consolidation is to pay off your debt sooner and to save you money while doing so.

Get a pro on your side: You can always call your credit card companies to negotiate a cheaper interest rate and/or reduced payments, but if your situation has become more severe, you don't have to go it alone. There are many nonprofit credit counseling agencies that will help you create a realistic budget and may even assist you in negotiating with creditors. What's more, many legitimate firms will charge little or nothing for their assistance.

Beware of credit repair: So-called credit repair firms promise to erase bad credit from your credit report. If the information on your credit report is accurate, nothing will remove it except time. According to the Federal Trade Commission, you should be suspicious of a company that demands payment for services up front, fails to inform you of your legal rights, or discourages you from contacting a credit bureau on your own.

Break the debt chain: You won't become debt-free overnight -- after all, you probably didn't run up your tab in just one day. But once you've got your debt under control, keep it that way. Consider using a debit card to make purchases at retailers worldwide so purchase amounts are automatically deducted from your checking account. That way, you only spend what you have.


The opinions expressed in this newsletter are those of the author and may not reflect those of The Washington Trust Company. The information in this report has been obtained from sources believed to be reliable, but its accuracy and completeness are not guaranteed. Any opinions expressed herein are subject to change at any time without notice. Any person relying upon this information shall be solely responsible for the consequences of such reliance. Performance is historical and does not guarantee future results.

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