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Numbers reveal the smarter way to Break Up with Debt

Posted on May 29, 2013

Sugar Land, Texas (May 29, 2013) — Money Management International (MMI), in partnership with CreditSeason.com, has released a new infographic highlighting the benefits and pitfalls of two distinctly different approaches to paying down debt.

“Like a bad romantic relationship, your relationship with debt can negatively affect every aspect of your life, from health problems like depression and insomnia to lost productivity at work,” said Jo Kerstetter, vice president of financial education and community relations for MMI. “Just like ending an unhealthy personal relationship, the hardest part about breaking up with debt is putting real action behind your plan.”

Consider following Sara's lead, detailed in the attached infographic, and break up with Debt the smarter way – by enrolling in a Debt Management Plan (DMP).

After years of suffering from the burden of debt, Sara, a fictitious character representing the average MMI client, called in the experts. With the help of a trained, certified credit counselor, Sara enrolled in an MMI DMP - a personalized debt repayment plan that allowed her to make one manageable monthly payment that was then dispersed to each of her creditors individually.

In addition, Sara’s counselor reviewed her budget and spending plan, providing Sara with an easy-to-follow action plan while also helping her to create realistic short and long-term financial goals.

  • Debt prior to starting a DMP: $19,290
  • Average interest rate prior to the DMP: 18.2 percent
  • Average interest rate on a DMP: 8.5 percent
  • Average drop in interest rate: 9.7 percent
  • Average monthly payment via DMP: $484

Three years later...

Sara successfully completed her DMP, and was able to shift her focus to saving. She began adding $300 a month in her emergency savings account, and $200 in a 401(k) that her company matched 100 percent.

So where is Sara now…five years later?

  • Debt: None
  • Savings: Because she completed her DMP in 32 months, Sara has been taking her former debt payment and putting it toward her savings accounts. Here’s what she has:
    • Liquid: $1,200
    • Retirement: $1,600
  • Sara went from -$19,290 to $2,800 in just three years!