If you are facing so much debt that it's becoming a problem, then you are not alone. More and more people are paying as much as they can, only to see their outstanding balances remain the same, or go up. And this is after they pay more than the minimum amount due. In short, they are in trouble. It only makes sense that you would want to know how to consolidate debt that lets you pay off what you owe in a short time, gives you lower monthly payments, and doesn't have a negative impact on your credit score.

While most people think of debt consolidation loans, the truth is that there is no best single way of consolidating debt. In fact, there are a few different options to choose from. That doesn't mean loans are a bad choice, it just means they are not the only choice.

To paraphrase Carl Walins, a respected financial advisor, "People often think of consolidation loans first, but there is more than one way to consolidate one's debt. For example, a good way to get all of your loans together, and have a lower monthly payment, is by working with an approved credit counseling agency. Such agencies can make deals with most creditors to give you better terms, keep your credit score about where it is, and prevent you from having to take out an additional loan."

One of the other more common ways people think of when it comes to how to consolidate debt is transferring high rate credit card balances to lower rate cards. On the surface, this is a good idea. However, you have to be very careful as each credit card company has different terms for balance transfers. While the initial rate may be quite favorable, it may only be temporary, and then the rate could be higher than what you are paying now. Some companies also allow you to transfer as much as you want, but only apply the best rate to the first few thousand dollars. Another thing to watch out for is a balance transfer fee. Walins sums it nicely when he cautions, "Beware of the fine print."

If the above options don't work for you, and you find you have to take out a debt consolidation loan, then see if you can get a secured loan. The most common form is the home equity loan. The nice thing about doing it this way is that you will get a lower rate than other loans because the lender is exposing themselves to less risk, as they have collateral in the form of your home. Of course this isn't always true, so it's up to you to compare the rates, terms, and overall cost of different loans before deciding which one is the best for how to consolidate debt in your specific situation.