This is part of our Pay Debt Quickly series sponsored by PDQ Pay Debt Quickly kit.

Question: Should I consider a Debt Program that would pay off all my high interest debt ($25,000) but leave me with no credit cards for the next three years?  I am considering this because I am only able to pay the minimum monthly payments, on these five different accounts.  ~ Judy

Answer
Hi Judy, one of the most important questions to ask is “will this really pay off the $25,000 in 3 years?” I used the calculator at http://www.bankrate.com/brm/calc/creditcardpay.asp to play with your numbers. You didn’t mention what interest rates you would be paying or your monthly payment.
So, I made some assumptions.

If you put in $25,000 as the balance and .01% (which is almost 0% — it doesn’t take 0%) for 36 months, your payment will be $694.55 every month. At 12%, the monthly payments are $830.36 every month.

If you can’t pay the monthly payment, you won’t be able to pay off $25,000 in 3 years.

My concern with these kind of high balance/long term plans is:
1.  Are you still so strapped that the first emergency will cause the whole plan to collapse?

2.  What happens if you lose your job or get sick?

I generally recommend that people also check out bankruptcy with a qualified attorney if they can’t reasonably expect to get out from under the debt in 4-6 years because if you can’t do it in that amount of time, the chances of something like #1 or #2 happening is pretty high. That would mean that you had been paying a lot of money for a lot of years and still end up in the same going through a bankruptcy.

The most important thing, Judy, is that you examine what caused the situation you are in and how it has served (or not served you). What will you do differently to make sure that you don’t slip back into the situation again?

Best wishes, Judy.