If you now qualify for a lower rate with your creditors because of falling rates or better credit, "this is a perfect example of how consolidation can help you," Hampel says.

But consumers need to remember that the debt, even at better terms, is still there. And they still have to be diligent about paying it off before they add to it.

For a smart move, look at what the consolidation will cost you for the total life of the loan, not just the monthly payment, says Todd Mark, spokesman for Consumer Credit Counseling Service of Greater Atlanta. And tread carefully.

"Consolidation is so dangerous, especially for the typical consumer we see," he says. "After consolidation, they get a false sense of relief. So often the worst cases we've seen are people who have consolidated into their mortgages."

Consolidation also can hurt your credit score if it involves a credit card, home loan or line of credit, says Craig Watts, public affair manager for Fair Isaac Corp., the company that developed credit scoring.

"Debt consolidation always has an effect on the credit report, so it always has an effect on the credit score," he says. Just how much the score will change, and for how long, depends on your report and how you treat your consolidation loan.

Want to gauge just how much that new card or loan could affect your credit? Go to the Fico Score Estimator at Bankrate.com. Calculate your score with and without the consolidation option.

If you're consolidating because you're in financial trouble, liquidate other assets first, advises, Ric Edelman, author of "Financial Security in Troubled Times." "You should not have money in assets if you also owe money in debt," he says. Three exceptions: mortgages, car loans and student loans.

But Bogosian disagrees. "Never use an appreciating asset to get rid of a depreciating asset," he says, adding that he'd tap life insurance first, if possible.

Bottom line: weigh the options carefully and do what will work best for you. And shop carefully.

What kind of consolidation loan should you tap?
If you have a plan for whittling down your debt and consolidation is part of it, what options should you tap? That depends on who you ask.

Rolling a handful of high-rate credit cards into one or two with better terms "works for people who have a certain amount of debt but aren't in the red zone," says Travis Plunkett, legislative director, Consumer Federation of America, a nonprofit advocacy group.

To avoid being late with payments, set up an automatic bank draft or e-bill payments to cover the minimums, says Howard.

Many financial advisers will caution against taking out a loan with the house as collateral, even if you're doing well financially. Others don't want to see consumers robbing their futures (retirement accounts) to get out of trouble now. And some believe it's a big mistake to trade asset producing accounts (like investments) to pay off debt.

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