Yes, you can refinance a personal loan. There’s no special product for it: you take out a new personal loan, use it to pay off the old one, and repay the new lender on new terms. People do it to get a lower rate after their credit improves, to shrink a monthly payment that’s become hard to carry, or to drop a cosigner. Most lenders don’t care that the money is going to another loan, and many will even send the payoff directly to your old lender.
Whether refinancing helps you is a different question, and it turns on a few numbers: the rate you’d get now, the fee the new lender takes out up front, any prepayment charge on the old loan, and how many months you’d be signing up for. This guide walks through each one, shows where the math quietly flips against you, and includes a planner that runs your own loan through the comparison in seconds.
Seven Straight Answers About Refinancing a Personal Loan
Short answers to the questions borrowers ask most, with the full reasoning further down.
Yes. The new lender pays off your old loan, and the old lender closes the account. Check your old contract for a prepayment penalty first.
There’s no legal waiting period, but lenders like to see several months of on-time payments, and your score needs time to recover from the first loan’s inquiry.
A small dip from the hard inquiry and new account is normal. On-time payments on the new loan usually rebuild it within months.
There’s no magic number because fees and term matter. In our examples, a drop of several points with a modest fee usually wins; a two-point drop with a big fee often doesn’t.
Yes, usually by stretching the term, which can raise your total cost. That trade can still be smart if the alternative is missing payments.
Often, and some offer rate cuts to keep you. Be wary of finance companies that repeatedly “renew” loans with new fees and insurance.
Yes. If you now qualify alone, a new loan in your name pays off the joint one, and the cosigner’s obligation ends with it.
How Refinancing a Personal Loan Works, Step by Step
The process takes about a week with most online lenders. Doing the steps in this order keeps you from paying for a loan you didn’t need or leaving a stray balance behind.
Pull your current loan’s numbers and contract
Log in to your lender’s portal and note four things: your exact balance, your interest rate (not just the APR), how many payments remain and your monthly amount. Then find the section of your loan agreement on prepayment. Most personal loans let you pay early without a penalty, but some, especially from consumer finance companies, charge one or use precomputed interest that shrinks your refund if you pay off early.
Check your credit and fix errors first
Get your free reports at AnnualCreditReport.com. Your score today versus when you took the original loan is the single biggest predictor of whether refinancing will save money. If you’ve paid down credit cards, added a year of on-time history or had an old late payment age, you may now land in a better rate tier. Dispute any errors before applying.
Get soft-check quotes from three to five lenders
Prequalification uses a soft inquiry, which doesn’t affect your score. Include a credit union, your own bank and two or three online lenders. Ask your current lender too; some will lower your rate rather than lose you. Write down each offer’s rate, fee and term in one place so you’re comparing the same things.
Request a payoff quote from your current lender
Your payoff amount is your balance plus interest that’s accrued since your last payment, and it’s usually good for about 10 to 15 days. Size the new loan to cover the payoff after the new lender’s origination fee comes out. If the fee is 5% and your payoff is $12,000, you’ll need to borrow about $12,632.
Apply formally and let the new lender pay off the old loan
This step triggers the hard inquiry and income verification. When the loan funds, choose direct payoff if the lender offers it; it removes the temptation to spend the money and guarantees the old account is closed. If funds come to your bank account instead, pay the old loan the same day.
Confirm a $0 balance and keep the paperwork
Don’t cancel the old loan’s autopay until you see it marked paid in full. Payoffs sometimes come up a few dollars short because of interest that accrued between the quote and the payment. Save the final statement or payoff confirmation; you’ll want it if the old account ever reports incorrectly.
Gather your two most recent pay stubs or, if you’re self-employed, your last two tax returns and a few months of bank statements. Have a photo ID, your Social Security number, your current loan’s account number and the payoff quote, and the routing details of the lender you’re paying off if you’ll handle the payoff yourself. Lenders also ask for your monthly housing cost and employer contact information.
When we reviewed lenders’ published application requirements, the issues they flagged most often as causing delays were income documents that didn’t match the stated income and payoff quotes that had expired before funding. Upload clear, complete documents the first time, and request a fresh payoff quote if approval takes longer than a week.
Is Now a Good Time to Refinance Your Personal Loan?
Your own credit matters more than the economy for this decision. Personal loans almost always carry fixed rates, so a refinance only helps if the rate you can get today is meaningfully better than the one you locked in.
The broader rate picture is mixed. The Federal Reserve raised its benchmark rate by a quarter point in September, to a range of 3.75% to 4%, after cutting late last year. That nudges new loan pricing upward at the margins, and the most common two-year bank personal loan rate has hovered around 11% to 12% for most of the past two years. In other words, waiting for a big drop in market rates is unlikely to pay off soon. The variable that moves most for an individual borrower is their own credit profile.
The market itself is busy. Unsecured personal loan balances reached a record $281 billion in the second quarter, with lenders competing hard: fintech lenders now make roughly 45% of new loans, and the average borrower carries about $11,700. Competition is good news for refinancers, because a strong applicant can often get several lenders bidding on the same loan. It also means more marketing aimed at people with weaker credit, where the offers are rarely better than what they already have.
One overlooked factor is time remaining. Interest on an installment loan is front-loaded, so most of the interest is paid in the early years. If you have six months left on a three-year loan, there’s simply not much interest left to save, and any fee will likely wipe it out. Refinancing tends to make the most sense with at least a year or two left.
The Real Math: Five Ways to Refinance the Same Loan
We ran one common situation through five refinance offers: $12,000 left on a loan at 24.99%, with 36 monthly payments of about $477 remaining. Every loan below is sized so the full balance gets paid off after the fee.
We found the same three lessons in nearly every scenario we modeled. First, the fee matters almost as much as the rate. The identical 13% loan saves $2,618 with no fee and $1,852 with a 5% fee; that fee costs about $766 once you count the interest charged on it. Second, stretching the term is how a “lower payment” refinance ends up costing more. The 60-month version drops the bill by about $190 a month but costs roughly $70 more overall, because you’re paying interest for two extra years. Third, a mediocre offer barely moves the needle: 18% with an 8% fee saves about $198 across three years, hardly worth a hard inquiry.
None of that makes the 60-month option wrong. If $477 a month has become impossible and the choice is between a lower payment and falling behind, the extra $70 is cheap insurance against late fees, collections and credit damage. The point is to choose it knowingly, and to prepay the new loan when you can, which most lenders allow without penalty.
Personal Loan Refinance Planner
Plug in your current loan and a refinance offer. The planner compares the payments you have left with the full cost of the new loan, fee included, and tells you in plain words whether the offer helps.
Enter your numbers to compare.
Use your loan’s interest rate, not its APR, in both rate fields. APR folds the original fee into a yearly figure, and since you already paid your old loan’s fee, using the APR there would overstate what refinancing saves. For the new offer, the planner adds the fee separately. If a lender only shows an APR, enter that APR with a 0% fee for a close estimate.
The planner sizes the new loan to cover your payoff, plus any prepayment penalty, after the fee is deducted. It then compares the sum of your remaining old payments with the sum of all new payments. In our testing, the result most people don’t expect is how quickly a longer term turns savings negative; try the same rate at 36 and then 60 months to see it for yourself.
What Refinancing Does to Your Credit Score
The credit impact is usually small and short-lived, but shopping the wrong way can make it bigger than it needs to be.
The hard inquiry. One formal application typically trims a few points. It stops affecting FICO scores after a year and drops off your report after two. The bigger risk is applying formally with several lenders, since FICO’s rate-shopping grouping covers mortgages, auto loans and student loans but generally not personal loans. Soft-check prequalification gets you real rate estimates with no impact.
The closed account. When the old loan is paid off, it shows as closed and paid in full, which is a positive mark that stays on your report for up to ten years. You also get a brand-new account, which lowers the average age of your accounts slightly. For people with long credit histories, that effect is minor.
The new payment history. From the first month, the new loan starts reporting. On-time payments are what rebuild any early dip, and autopay is the easiest insurance. Many lenders also trim a quarter point or so off the rate for enrolling.
Timing around big applications. If you’re planning to apply for a mortgage or car loan in the next few months, consider waiting. A new account and fresh inquiry right before a mortgage application can nudge your rate or prompt extra underwriting questions.
Where to Refinance a Personal Loan, and What Each Option Costs
Lenders price the same borrower very differently. Here’s how the main sources compare, including two non-loan alternatives some borrowers use.
| Option | Typical pricing | Fees | Credit needed | Watch for | Best fit |
|---|---|---|---|---|---|
| Credit union | Capped at 18% at federal credit unions | Often none | Fair and up; membership | Membership rules | Fair credit; anyone wanting low fees |
| Your bank | Near the ~12% bank average for good credit | Often none | Good to excellent | Stricter approval | Existing customers with strong credit |
| Online lenders | About 6%–36% APR | 0%–12% origination | Broad range | Large fees at lower scores | Fast soft-check comparisons |
| Current lender | Varies; may offer a retention rate | Varies | Your history with them | “Renewal” with new fees | Worth one phone call |
| Consumer finance company | Often highest | Fees, sometimes add-on insurance | Lower scores | Loan flipping | Rarely a refinance upgrade |
| Balance transfer card | 0% intro, then 20%+ | 3%–5% of balance | Good to excellent | Promo ending | Small balances paid within the promo |
| HELOC or home equity loan | Around 7%–8% average | Possible closing costs | Equity plus good credit | Your home is collateral | Rarely worth the risk for a personal loan |
Credit unions deserve special attention. Federal credit unions are generally limited to an 18% interest rate on most loans, a ceiling the NCUA has extended through September 10, 2027, and many skip origination fees entirely. For a borrower whose online quotes come back in the 20s, that cap alone can make a credit union the best refinance option available. Membership is often easier than people expect: many credit unions accept anyone who lives or works in a county or joins a partner association.
When we compared lender disclosures, the biggest spread between offers wasn’t the rate but the fee. Two lenders quoting nearly identical interest rates can differ by several percentage points in origination fees, which on a $12,000 loan is hundreds of dollars. Always compare APR, which includes the fee, alongside the dollar amount the lender will deduct.
Hidden Costs That Turn a Refinance Into a Bad Deal
The rate is the headline. These are the details in the fine print that decide whether you actually come out ahead.
Fees from 0% to about 12% are common, and they’re deducted from the loan before it’s paid out, so you borrow the fee and pay interest on it. A lender charging 0% at a slightly higher rate can beat one with a lower rate and a 6% fee, especially on shorter terms. Compare APRs and the dollar amount of the fee side by side.
Most mainstream personal loans let you pay off early for free, but read your contract. Some loans, often from consumer finance companies, use precomputed interest. When those loans are paid off early, the refund of unearned interest may be calculated with the “Rule of 78s,” which front-loads interest so you get back less than you’d expect. Federal law bans that method on precomputed consumer loans longer than 61 months, and some states restrict it further, but it still appears on shorter loans. Your payoff quote will show the real number.
Some lenders add credit life, disability or unemployment insurance to the loan, financing the premium so you pay interest on it too. These products are generally optional. If one was added to your current loan, ask whether it can be cancelled with a prorated refund, and decline it on any new loan unless you’ve compared it with an ordinary term life policy, which is usually far cheaper.
Repeatedly refinancing a borrower into new loans, each with fresh fees, is known as loan flipping, and consumer regulators have long flagged it as a predatory practice. It most often happens with small-dollar installment loans: the lender calls with an offer of “a little extra cash,” and the borrower ends up restarting the clock on a bigger balance. If you’re offered a renewal, ask for three numbers in writing: the new balance, the total of all payments and the fees and insurance included. If the new total is higher than what you’d pay by simply finishing the current loan, decline.
Two smaller items round out the list. Late-payment fees and returned-payment fees vary widely by lender, so check them in the new loan’s terms. And watch your first payment date: some lenders set it 30 to 45 days out, which is fine, but make sure the old loan’s final autopay doesn’t hit at the same time and overdraw your account.
Which Situation Sounds Like Yours?
The right move depends on why you want to refinance and what’s changed since you borrowed. Find the box that fits.
This is the best reason to refinance. A jump from the low 600s to the 700s can move you from rates in the 20s to the low teens or below. Prequalify with three to five lenders, keep the new term at or under your remaining months, and favor no-fee offers. If your current lender won’t match, take the better deal.
Call your current lender before refinancing. Many offer hardship programs such as a temporarily reduced payment, a due-date change or a short deferral, with no new loan and no new fee. If that’s not available, a longer-term refinance can lower the payment, but expect to pay more overall. A nonprofit credit counselor can review your whole budget for free and spot options you might miss.
A new lender will see the late payments and either decline or quote a high rate. Your current lender is your best bet: ask about a loan modification or workout plan, and get any agreement in writing. Bringing the loan current before it reaches 60 or 90 days late protects your credit far more than any refinance could.
Most personal loans don’t offer cosigner release, so refinancing into your name alone is usually the only way to free the other person. You’ll need to qualify on your own income and credit. In a divorce, a court order assigning the debt to one spouse doesn’t change the lender’s contract; both people stay liable until the loan is refinanced or paid off.
You can refinance, but it’s often better to wait. Your score still carries the recent inquiry and a very new account, and many lenders want to see several on-time payments. Use the time to pay down credit card balances, which can lift your score faster than anything else. Recheck soft quotes in six months.
Many lenders will approve a larger loan that pays off the old one and gives you extra cash. Treat the extra as a separate decision: it’s new debt at the new rate. If you’re also carrying high-rate credit card balances, folding them into a single lower-rate loan can make sense, as long as you don’t run the cards back up.
The Military Lending Act caps most consumer loans to active-duty members and dependents at a 36% military annual percentage rate, which counts many fees and add-on products. Many military-focused credit unions offer personal loans well below civilian averages. Military OneSource provides free financial counseling if you’re weighing options.
These loans often carry high rates, precomputed interest and add-on insurance, so refinancing with a credit union or bank can save a lot. Get a written payoff quote first so you know the true cost of leaving, ask about cancelling any credit insurance for a refund, and decline “renewal” offers from the same lender unless the total cost drops.
Online offers at 30% or more with high fees rarely beat what you have. A credit union, a share-secured loan backed by your own savings or adding a creditworthy cosigner can open better rates. If none of those work, focus on extra payments toward the current loan, which saves interest with no fees and no inquiry.
The lender must tell you why or how to request the reasons. Common ones are high debt-to-income, recent inquiries, thin credit or unverifiable income. Fix the specific issue and recheck in a few months. Meanwhile, paying even $25 to $50 extra a month on the current loan shortens it and cuts interest, the same goal a refinance aims for.
Free Help, Lender Checks and Where to Complain
None of these sell loans. Use them to check your credit, confirm a lender is licensed, get unbiased budget advice or report a lender that misled you. Numbers were checked against each organization’s own published contact information.
| # | Who to contact | Use it for | Phone | Cost |
|---|---|---|---|---|
| 1 | AnnualCreditReport.com | Free reports from all three bureaus before you apply | 877-322-8228 | Free |
| 2 | NMLS Consumer Access | Check whether a nonbank lender is licensed in your state | Online | Free |
| 3 | MyCreditUnion.gov (NCUA) | Find credit unions you can join | Online | Free |
| 4 | National Foundation for Credit Counseling | Free budget review; help if payments are unaffordable | 800-388-2227 | Free review |
| 5 | Consumer Financial Protection Bureau | Complaints about lenders and loan servicing | 855-411-2372 | Free |
| 6 | Federal Trade Commission | Report loan scams and upfront-fee schemes | 877-382-4357 | Free |
| 7 | Military OneSource | Free financial counseling for service members | 800-342-9647 | Free |
| 8 | Your state attorney general | Complaints about state-licensed lenders | Online | Free |
| 9 | LawHelp.org | Free legal aid if a lender sues or misleads you | Online | Free |
| 10 | 211 helpline | Local financial counseling and emergency help | Dial 211 | Free |
One scam pattern shows up constantly around refinancing: a “lender” approves you instantly, then asks for a fee by gift card, wire or payment app to “release” the funds or “insure” the loan. Legitimate lenders take any origination fee out of the loan itself and never ask you to pay before funding. If a lender isn’t a bank or credit union, look it up in NMLS Consumer Access or with your state’s financial regulator before sharing your Social Security number.
The CFPB’s complaint portal remains open, although the agency has narrowed its operations and is in a court fight over its funding. Filing with your state attorney general or financial regulator at the same time often gets faster attention for state-licensed lenders.
Bing Map Locator: Credit Unions and Banks Near You
Pick what you want to find and open Bing Maps centered on your location. Your location is used only to build the map link in your browser.
Our Verdict
If your credit has improved, you have a year or more left, your old loan has no prepayment penalty and a new offer lowers your total cost at the same or a shorter term, refinance. Start with your current lender and a credit union, add a few soft-check online quotes, choose direct payoff and keep autopay on.
With only months left, a big fee or an offer that only works by stretching the term, the better move is usually extra payments on the loan you have. If the real problem is that the payment no longer fits your budget, call your lender about hardship options and talk to a nonprofit credit counselor before signing a longer loan.
Questions people still ask
How many times can you refinance a personal loan?
There’s no legal limit. Each refinance usually means a new hard inquiry and possibly a new fee, so frequent refinancing can cost more than it saves. Refinance when the savings are clear, not every time a new offer arrives.
Can I refinance a personal loan with bad credit?
Sometimes, but offers at that level often carry rates and fees higher than your current loan. A credit union, a share-secured loan or a cosigner can help. Otherwise, improving your score for six to twelve months usually unlocks better offers.
Do I need a payoff letter from my old lender?
You need a payoff quote showing the exact amount due through a specific date, including daily interest. Most lenders provide it online or by phone. Direct-payoff lenders often request it for you.
Is refinancing the same as debt consolidation?
Not exactly. Refinancing replaces one loan with another. Consolidation combines several debts, such as cards and loans, into one. The same personal loan can do both.
Does refinancing restart my loan?
Yes. The new loan has its own term starting from day one. That’s why choosing a term no longer than your remaining months matters if you want to finish on schedule.
Can I refinance a secured personal loan?
Yes. When the old loan is paid off, the lender releases its claim on the collateral. If the new loan is unsecured, your savings account, car or other collateral is freed.
Can I refinance a personal loan into a lower rate if rates rise?
Personal loans are almost always fixed-rate, so rising market rates don’t change your existing loan. They do make new offers a bit pricier, which is one more reason to compare total cost carefully.
How long does it take to refinance a personal loan?
Online lenders often approve within a day and fund within one to seven days. Banks and credit unions can take a week or more. The old loan’s payoff may take several more days to post.
Will my old lender try to stop me?
They can’t block you, but some may offer a better rate to keep your business. It’s worth asking them directly before you apply elsewhere.
Should I refinance a personal loan with a HELOC?
Rarely. The rate may be lower, but you’d be putting your home on the line for unsecured debt, the rate is usually variable and the interest generally isn’t tax-deductible when used this way.
How this page was checked. Bank personal loan rates come from the Federal Reserve’s consumer credit release; balance and market figures from TransUnion’s quarterly credit industry report; credit union rate limits from the NCUA; and rules on prepayment calculations, military lending and inquiries from federal law and the major scoring models. Example payments and totals are our own calculations. Contact information was checked as of October 24. Your loan agreements are the final word on your terms.
This page is independent and not affiliated with any lender or organization listed. It is general information, not financial or legal advice.
Key sources: Federal Reserve · TransUnion · NCUA · CFPB · FTC