Debt consolidation means taking out a new loan to pay off a number of liabilities and consumer debts, generally unsecured ones. In effect, multiple debts are combined into a single, larger piece of debt, usually with more favorable payoff terms: a lower interest rate, lower monthly payment or both.

Here's How the Debt Snowball Works Step 1: List your debts from smallest to largest. Step 2: Make minimum payments on all debts except the smallest—throw as much money as you can at that one. ... Step 3: Repeat this method as you plow your way through debt.