Consolidating auto loans

Debt consolidation doesn't lower the principal amount you owe, but it lowers your overall payments by reducing your interest rate.

That's why it makes the most sense for high-interest debt like credit cards. The downside is that unsecured loans can be harder to get, especially if you have poor credit, and your interest rate will likely be higher.

Secured loans tend to have lower interest rates than credit cards, but the big risk is that you could lose your house or car if you can't make the payments. You've probably gotten one of these offers in the mail -- a credit card with a 0 percent introductory rate that lets you transfer balances from other credit cards.

That's an option if you're looking to consolidate your credit card debt. If you can't pay off most or all of your debt by the time the introductory rate expires, you'll be back to paying high interest rates again.

The amount of debt you transfer also may be capped by your credit limit.

The potential upside with this option is you could pay down your debt without paying any interest.

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Then you make one monthly payment into an account held by the counseling agency, and the counselor pays your creditors.

A DMP is not a loan, and Bovee warns that there is "not a lot of wiggle room" in a credit counseling company's plan for you, which typically last up to five years. If you miss one, you could end up back where you started with high interest rates.

Even if you are approved for a loan, the interest rate might be similar to what you're paying on your credit cards.

The debt consolidation option you choose should help you pay down debt while staying within your budget.

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