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When and How to Refinance a Personal Loan
When you refinance a personal loan, you pay it off with another loan. Ideally, your new loan has a lower rate.
Annie Millerbernd Lead Writer | Personal loans, high-interest loans, cash advance apps
Annie Millerbernd is a NerdWallet authority on personal loans. Before joining NerdWallet in 2019, she worked as a news reporter in California and Texas, and as a digital content specialist at USAA. Annie's work has been cited by the Northwestern University Law Review and Harvard Kennedy School. Her work has been featured in The Associated Press, USA Today and MarketWatch. She’s also been quoted in New York magazine and appeared on NerdWallet's "Smart Money" podcast as well as local TV and radio. She is based in Austin, Texas.
Ronita Choudhuri-Wade Lead Writer | Personal finance, Personal loans
Ronita Choudhuri-Wade covers personal loans for NerdWallet. Before joining NerdWallet, Ronita was a freelance writer for the fintech company Wise (formerly TransferWise) on global money transfers and banking internationally. She was previously a senior internal wholesaler at MainStay Investments, holding her Series 6, 65, 63 and 7 licenses. Ronita graduated from New York University and has a master’s degree in globalization and development from the University of Manchester in the United Kingdom. Ronita currently lives in Tulsa, Oklahoma.
Kim Lowe is a lead assigning editor on NerdWallet's loans team. She covers consumer borrowing, including topics like personal loans, buy now, pay later and cash advance apps. She joined NerdWallet in 2016 after 15 years at MSN.com, where she held various content roles including editor-in-chief of the health and food sections. Kim started her career as a writer for print and web publications that covered the mortgage, supermarket and restaurant industries. Kim earned a bachelor's degree in journalism from the University of Iowa and a Master of Business Administration from the University of Washington. She works from her home near Portland, Oregon.
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NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
When you refinance a personal loan, you replace your existing loan with a new one, either from your current lender or a different one. You use the funds from the new loan to pay off the existing loan, and then you make monthly payments toward the new one.
Refinancing makes the most sense when the interest rate or monthly payments are lower than your current loan.
Pre-qualify for a new personal loan. Pre-qualify with multiple lenders to see the rate and terms you can get on a new loan. Pre-qualifying doesn’t affect your credit score, and it lets you compare new loan offers with the terms on your existing loan.
Consider refinancing costs. Add up the new loan’s interest and fees and compare them to your existing loan to determine whether refinancing will lower your monthly payments or save you money in the long term.
Submit a new loan application. Complete a formal application with the new lender and provide any documents it may need to verify your details and income. The lender will run a hard credit check, which will cause your credit score to dip a few points.
Use the new loan to pay off your current loan. Some lenders transfer funds to your bank account, while others may directly pay off your first loan.
Confirm the old loan is closed. Check your account to ensure there’s no balance on your first loan to avoid additional fees.
Start making payments toward the new loan. Most lenders allow you to set up automatic, recurring payments from a checking account.
Lenders that allow refinancing
Some lenders allow you to refinance loans from other lenders, but not their own loans. Other lenders let you use the proceeds of a personal loan for any reason, including refinancing.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
Your credit has improved or you’ve paid off other debts. Borrowers with good or excellent credit (690 or higher) and a low debt-to-income ratio typically receive the lowest personal loan rates. If you’ve consistently made loan payments on time and your credit score has grown, then you may receive a lower rate on a new loan and refinancing could save you money.
You need lower payments. Refinancing can extend your repayment term, lowering your monthly payment and leaving more room in your budget. You can use the extra cash to repay higher-cost debts or build your savings.
You want to pay off the loan faster. If higher monthly payments fit into your budget, you can refinance to a shorter-term loan to reduce your total interest costs and clear the debt sooner.
This strategy works best if your existing loan carries a long repayment term and you can get a better rate.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
NerdWallet's ratings are determined by our editorial team. The scoring formula incorporates coverage options, customer experience, customizability, cost and more.
You can’t get a lower rate. It can be difficult to qualify for a better rate on a new loan if your credit score has decreased. Paying off other debts and making on-time payments can help build your score back up. If you are refinancing to lower your monthly payments by extending your loan term, note that you are likely to pay more in interest over time.
You may pay additional fees. A new loan may come with an origination fee, typically 1%-10%, which can offset any potential savings on interest.
Any time you apply for a personal loan, including to refinance, you may see a small, temporary dip in your credit score. As long as you make your full monthly payments on time, refinancing shouldn't have a long-term effect on your credit score.
Is it good to refinance a personal loan?
It’s best to refinance a personal loan if you can qualify for a lower rate — if your credit has improved or you’ve lowered your debt-to-income ratio, for example. Refinancing can also lower your monthly payment to make room in your budget, or it can increase your monthly payment so you can pay off the loan faster.
, including to refinance, you may see a small, temporary dip in your credit score. As long as you make your full monthly payments on time, refinancing shouldn't have a long-term effect on your credit score.
Is it good to refinance a personal loan?
It’s best to refinance a personal loan if you can qualify for a lower rate — if your credit has improved or you’ve lowered your debt-to-income ratio, for example. Refinancing can also lower your monthly payment to make room in your budget, or it can increase your monthly payment so you can pay off the loan faster.
Comparing options? See if you pre-qualify for a personal loan - without affecting your credit score
Just answer a few questions to get personalized rate estimates from multiple lenders.