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How medics can manage and reduce personal loan debt

Here are seven strategies to pay down debt and live within your means

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Reducing debt should be a top goal and starts with living within your means.


EMS1 Lifestyle Staff

First responders, like most Americans, likely have debt from a car loan, home mortgage or unpaid credit card balance. You may also have personal loan debt.

What is personal loan debt

Personal loan debt is money an individual borrows from a financial institution, lender or credit union for personal use. Typically, a personal loan is unsecured, meaning there isn’t collateral like a home or car that the lender can repossess if the loan is not repaid. Personal loans are often used to consolidate existing debt, finance a major purchase or cover emergency expenses.

Personal loans usually come with fixed interest rates, repayment terms and monthly payments that the borrower agrees to pay over a specified time period. Each month, the borrower pays toward interest as well as the loan’s principal balance. Personal loan interest rates and terms can vary based on the borrower’s credit score, as well as the term and loan amount.

From Q3 2022 to Q3 2023, WalletHub reported that most U.S. states had an overall decrease in the average balance of unsecured personal loan debts, but 18 states saw an increase. According to John Kiernan, WalletHub editor, this “suggests that either people are handling the current economic conditions well, or they are turning to other sources of borrowing, like credit cards and buy-now-pay-later offers. Given Americans’ ever-growing mountain of credit card debt, the latter seems to be true.”

This map shows the states adding the most unsecured personal loan debt.

Source: WalletHub

The top five states with personal loan debt increases in the research period were Montana, Iowa, Delaware, Maine and Idaho.

7 tips to pay off personal loan debt

Regardless of where you live and work as a first responder, reducing debt should be a top goal and starts with living within your means. As a first responder, you should have a steady, predictable income that is occasionally or regularly supplemented with overtime wages. With that as a starting point, here are seven tips to pay off your personal loan debt.

1. Budget income and expenses every month. Create a detailed budget to understand your monthly income and spending, and identify areas to cut costs. Make sure your budget captures fixed costs, like housing and utilities, as well as variable expenses, like food and entertainment. Once you know how you are spending your money each month, prioritize loan repayments over non-essential expenses. Adding a few more dollars each month toward debt repayment can make a big difference.

Action item: Analyze your monthly expenses, prioritize essential spending and allocate extra funds to personal loan repayments.

2. Select a debt repayment method. After creating a budget that is within your monthly income, select an approach to debt reduction. The debt snowball approach aims at paying off debts with the smallest balances first for quick successes. The debt avalanche approach focuses on debts with the highest interest rates. Both methods can be effective in reducing overall debt. Do you want quick wins or big impacts?

Action item: Choose a debt repayment strategy (snowball or avalanche) and consistently apply extra payments to one loan at a time. After a debt is paid off, apply that payment amount to the next debt until you have paid all your debts.

3. Educate yourself. If you’re already feeling confused or overwhelmed at the prospect of creating a monthly budget or having to select the snowball or avalanche approach, seek out some education. Your employer or employee assistance program may have resources available to help you get started. Ask a colleague if they have a person or resource they recommend. Of course, there is unlimited personal advice available on the internet, but click carefully, and if a debt reduction solution sounds too good to be true, it probably is.

Action item: Research methods to pay down your debts. Millions of people have followed the advice in the “Total Money Makeover: a Proven Plan for Financial Fitness” by author and radio show host Dave Ramsey. Ramsey gives a straightforward approach to budgeting and debt repayment.

4. Refinance or consolidate. Refinancing involves taking out a new loan with better terms to pay off existing debt. Debt consolidation combines multiple debts into a single loan, ideally with a lower interest rate. Currently, interest rates are high for all types of debt financing, including personal loans. In January 2024, NerdWallet reported, “the average personal loan interest rate for consumers with good credit (690 to 719 credit score) is 17%.” Borrowers with lower credit scores are going to pay higher interest rates for personal loans.

Action Item: Research refinancing options and consolidate loans where possible to reduce interest rates and simplify payments. During the research process, make sure to understand the loan’s terms and if the interest rate is fixed or variable. It is important that the monthly loan payment from refinancing or consolidating fits within your monthly budget and ability to pay.

5. Make more money. For better or worse, most first responders can gobble up overtime, take on extra shifts at their primary employer and work a second or even third job within their profession. Remember though, that overtime can add to your stress level, cause burnout and sap your energy for personal care and time with friends and family. If working overtime is part of your debt repayment strategy, keep in front of your mind that you are working overtime to pay down debt, not to live a lifestyle beyond your regular wages.

Action item: Work more hours for additional income and direct this extra money toward your debt snowball or avalanche.

6. Utilize windfalls wisely. Use unexpected income, like tax refunds, bonuses or inheritances strategically to pay down debt. Don’t give into the temptation to treat yourself to a vacation or vehicle upgrade with a windfall. Instead, focus on delayed gratification of debt reduction and the financial independence that comes with less or no debt at all.

Action item: Allocate any windfall amounts directly to loan repayment instead of using them for discretionary spending.

7. Leverage community support programs. As a first responder, you might be eligible for unique community support programs. These programs can include financial counseling and assistance, discounted services or crowdfunding. These programs can provide financial relief in various areas of life, freeing up more of your income to pay off personal loan debt. Crowdfunding might be something to consider if you have significant debt attributable to a catastrophic injury or illness, or inability to work because of an on-duty injury.

Action item: Reach out to organizations within your community, including local government offices and first responder members associations, for information on available assistance programs. Use any benefits or savings gained through these programs to increase personal loan repayments.

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EMS1 is using generative AI to create some content that is edited and fact-checked by our editors.