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.
Ronita Choudhuri-Wade
Annie Millerbernd
By Annie Millerbernd and  Ronita Choudhuri-Wade 
Updated
Edited by Kim Lowe

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Refinancing a personal loan can help you save money on interest or lower your monthly payments.

Here’s how to refinance a personal loan, when it’s a good idea and what to consider before you refinance.

Personal loans from our partners

SoFi logo
Check Rate

on SoFi

SoFi

5.0

NerdWallet rating 
SoFi logo

5.0

NerdWallet rating 
APR 

8.99- 29.99%

Loan amount 

$5K- $100K

Check Rate

on SoFi

Avant logo
Check Rate

on Avant

Avant

4.0

NerdWallet rating 
Avant logo

4.0

NerdWallet rating 
APR 

9.95- 35.99%

Loan amount 

$2K- $35K

Check Rate

on Avant

BestEgg logo
Check Rate

on Best Egg

Best Egg

4.5

NerdWallet rating 
BestEgg logo

4.5

NerdWallet rating 
APR 

8.99- 35.99%

Loan amount 

$2K- $50K

Check Rate

on Best Egg

What does it mean to refinance a personal loan?

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.

How to refinance a personal loan

  1. 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.

  2. 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.

  3. 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. 

  4. 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.

  5. Confirm the old loan is closed. Check your account to ensure there’s no balance on your first loan to avoid additional fees.

  6. 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.

Here are seven lenders’ refinancing policies.

Lender

Refinances loans

Est. APR

Upgrade
NerdWallet rating 
Get Rate

on Upgrade's website

From Upgrade or another lender.

8.49% - 35.99%.

Lightstream
NerdWallet rating 
Get Rate

on LightStream's website

Only from other lenders.

6.99% - 25.49%.

SoFi
NerdWallet rating 
Get Rate

on SoFi's website

Only from SoFi.

8.99% - 29.99%.

PenFed Credit Union Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

Only from other lenders.

7.99% - 17.99%.

Discover
NerdWallet rating 
Get Rate

on Discover's website

From Discover or another lender.

7.99% - 24.99%.

Wells Fargo Personal Loan
NerdWallet rating 
See my rates

on NerdWallet's secure website

From Wells Fargo or another lender.

7.49% - 23.74%.

BestEgg
NerdWallet rating 
Get Rate

on Best Egg's website

Only from other lenders.

8.99% - 35.99%.

When refinancing is a good idea

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.

Personal loans from our partners

SoFi logo
Check Rate

on SoFi

SoFi

5.0

NerdWallet rating 
SoFi logo

5.0

NerdWallet rating 
APR 

8.99- 29.99%

Loan amount 

$5K- $100K

Check Rate

on SoFi

Avant logo
Check Rate

on Avant

Avant

4.0

NerdWallet rating 
Avant logo

4.0

NerdWallet rating 
APR 

9.95- 35.99%

Loan amount 

$2K- $35K

Check Rate

on Avant

BestEgg logo
Check Rate

on Best Egg

Best Egg

4.5

NerdWallet rating 
BestEgg logo

4.5

NerdWallet rating 
APR 

8.99- 35.99%

Loan amount 

$2K- $50K

Check Rate

on Best Egg