Personal loans can be a great resource for people who don’t have cash on hand to cover medical emergencies, home renovations, car repairs, or just about any other expense. But if you took out one of these loans a while back and your financial situation has since changed, you may benefit from refinancing the personal loan.
Borrowers often refinance a personal loan to take advantage of lower interest rates, reduce their monthly payments, or access additional funds. Below, we’ll walk you through how personal loan refinancing works and where to refinance a personal loan.
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Can you refinance a personal loan?
Yes, you can refinance a personal loan, and it’s much less complicated than student loan refinancing or mortgage refinancing. You’ll just apply for a new personal loan and use the funds from that loan to pay off the balance on the old loan.
The typical goal of refinancing a personal loan is to lower your interest rate, monthly payment, or both. You might also refinance because you need to borrow more money.
Applying for a new personal loan to refinance or consolidate loans will lower your credit score in the near term. If you make on-time payments and your debt-to-income ratio (DTI) is not above 30%, your score will improve over six months.
Minimize the impact by shopping for and applying for new personal loans within 45 days so the credit checks count as a single inquiry. Keep an eye on your DTI to keep it below 30%, and make on-time payments on your new loan. Finally, avoid accumulating additional debt, including paying off credit cards in full each month or not using them (easier said than done!).
Erin Kinkade, CFP®
Here’s how it works:
- Shop around for a new personal loan. Research the best personal loans available based on your credit and the amount you need to borrow. You may be able to get a new personal loan from the same lender you have your current loan with, but you can and should look elsewhere too. Prioritize lenders that have lower interest rates and no origination fees.
- Prequalify for a personal loan. Once you’ve narrowed your list of personal loan companies, prequalify with any of your top picks offering this option. Prequalifying won’t affect your credit score and will help you determine where you’ll get the best rates. Research what credit score you need for a personal loan with each lender to ensure you qualify, and have information such as your name, birthdate, Social Security number, employer, and income ready to enter into the online application.
- Apply for a personal loan. Choose the best loan option, and apply online or in person. Many lenders offer same- or next-day funding for personal loans, meaning you’ll get the cash fast.
- Use the funds to pay off your current loan. Ensure the old loan account is officially closed once you’ve paid it off.
- Start making payments on the new personal loan. Many lenders offer a small discount for setting up automatic payments. Make sure you stay on top of payments to avoid late fees and dings to your credit score.
Refinancing personal loans can carry several costs. You may have to pay a prepayment penalty for paying off the old loan ahead of schedule, and the new loan may have an origination fee to budget for. Be sure you’re clear on your lenders’ policies before you proceed with refinancing.
Where to refinance a personal loan
Refinancing a personal loan can be a strategic financial move. You can often refinance your loan with the same bank, but it’s not a requirement. Depending on your financial situation and creditworthiness, a different lender may provide more favorable terms or rates.
When choosing where to refinance, consider interest rates, fees, loan terms, and how much you could save. Here are five excellent choices to refinance your loan. Click each lender’s name in the table for more details about its personal loan refinance options.
Credible
Why Credible is the best marketplace
Credible is ideal for those who want to explore their options. Its marketplace lets you compare prequalified rates and terms to see which lender will most likely offer the best terms. The platform is user-friendly, making the process efficient and straightforward.
- Compare loans from multiple curated lenders
- Get prequalified loan offers in as little as 2 minutes
- Get funded within a few business days
- No option to apply for joint loans
| Rates (APR) | 6.99% – 35.99% |
| Loan amounts | $1,000 – $200,000 |
| Repayment terms | 1 – 10 years |
Eligibility requirements
- Soft credit check? Yes
- Minimum credit score: Varies
- Minimum income: Not disclosed
- States: Loan partners may not be available in all states
Repayment terms
Credible loans have repayment terms ranging from one to 10 years. Some lenders may charge a prepayment penalty if you pay your loan off early.
Upgrade
Why Upgrade is the best personal loan for fair credit
Upgrade is a fantastic option if you have fair credit. It focuses on making the process straightforward and accessible. It can help you reduce your overall interest burden and streamline payments. Upgrade can coordinate the transfer of funds from your new loan to your previous creditors to ensure your old loan is paid off.
- Choose your monthly payment and loan term
- Joint applications accepted
- Loan funds may be available in as little as 1 day
- Smaller loan maximum limit
- 1.85% to 9.99% origination fee
| Rates (APR) | 8.49% – 35.99% |
| Loan amounts | $1,000 – $50,000 |
| Repayment terms | 2 – 7 years |
Eligibility requirements
- Soft credit check? Yes
- Minimum credit score: 580
- Minimum income: Not disclosed
- States: All 50 states and Washington, D.C.
Repayment terms
Upgrade loans have repayment terms from two to seven years, and your monthly due date is adjustable to fit your budget. A short-term financial hardship program is available if you’re temporarily unable to manage payments.
Upstart
Why Upstart is the best personal loan for no credit history
Upstart is a great option if you have a thin credit file. Upstart uses AI to evaluate more than just your credit score. This can feel like a lifesaver if you might not qualify for a new loan under traditional credit-scoring methods.
- Funding is available as soon as the next business day
- Borrowers with little to no credit history can still get approved
- No prepayment penalty if you pay your loan off early
- Origination fee of up to 12%
- Limited repayment term options
| Rates (APR) | 7.80% – 35.99% |
| Loan amounts | $1,000 – $75,000 |
| Repayment terms | 3 or 5 years |
Eligibility requirements
- Soft credit check? Yes
- Minimum credit score: None
- Minimum income: Not disclosed
- States: All 50 states and Washington, D.C.
Repayment terms
Upstart doesn’t offer as many loan terms as other lenders; you’ll pay your loan off over three or five years. You have the option to change your monthly payment due date and prepay your loan in part or in whole at any time, with penalty fee.
SoFi
Why SoFi is the best personal loan for good credit
Refinancing with SoFi is an excellent choice if you have good credit and want to lower your interest rates or adjust your loan terms. SoFi’s refinancing options don’t include a required origination fee or prepayment penalties.
- No origination fees, late payment fees, or prepayment penalties
- Check rates in as little as 60 seconds
- Some borrowers may qualify for same-day funding
- Higher minimum loan amount
- Autopay discount is lower than what some lenders offer
| Fixed rates (APR) | 8.99% – 29.99% with all discounts |
| Loan amounts | $5,000 – $100,000 |
| Repayment terms | 2 – 7 years |
Eligibility requirements
- Soft credit check? Yes
- Minimum credit score: 660
- Minimum income: Not disclosed
- States: All 50 states and Washington, D.C.
Repayment terms
SoFi personal loans feature terms from two to seven years. If you enroll in autopay, you’ll get a 0.25% rate discount. There’s no penalty if you decide to pay your loan off early.
LightStream
Why LightStream is the best personal loan for excellent credit
LightStream is a top choice if you have excellent credit. It offers some of the lowest interest rates, and we like its Rate Beat program. This program guarantees that LightStream will offer you an interest rate 0.10 percentage points lower than a competing offer if you meet certain conditions.
- Rate match guarantee ensures that you get the best rate possible
- Same-day funding may be available
- Take advantage of a longer repayment term if you need lower payments
- No option to prequalify or check rates with a soft credit pull
- Minimum loan amount is $5,000
| Rates (APR) | 7.49% – 25.49% |
| Loan amounts | $5,000 – $100,000 |
| Repayment terms | 2 – 12 years |
Eligibility requirements
- Soft credit check? No
- Minimum credit score: 660
- Minimum income: Not disclosed
- States: All 50 states and Washington, D.C.
Repayment terms
LightStream offers some of the longest repayment terms of any lender, giving you up to 12 years to repay your loan. You can pay your loan off early, without a prepayment penalty and rate discounts can help bring the cost of your loan down.
When can you refinance a personal loan?
You can refinance a personal loan at any point during the life of the loan, but you should wait until you have a good reason to refinance, such as an improvement in your credit score or a need for smaller payments.
You can refinance a personal loan multiple times, but remember: Your credit score may dip every time you refinance because applying for a personal loan results in a hard inquiry on your credit report. A hard inquiry can lower your score by up to five points for one year.
You may also need to pay an origination fee every time you take out a new personal loan, depending on your credit score and the lending institution’s fee structure.
It might be an appropriate time to refinance if interest rates have dropped, your credit score has improved, you need different terms (for example, lower monthly payments by extending your loan to a longer term), or you need additional funds and have no other resource than to access the funds from a personal loan. (I want to emphasize this should only be an option if it’s a need, not a want.)
Erin Kinkade, CFP®
Can you refinance a personal loan for more money?
Because refinancing a personal loan is as simple as getting a new one to pay off the old one, so you can get more money when you refinance.
For example, say you still owe $5,000 on your loan. If you can qualify with the same or another lender for a $10,000 personal loan, you can use half to pay off the old loan and pocket the remaining $5,000.
Taking out a personal loan for more money will increase your monthly payments or the time it takes to repay the loan. You’ll also spend more on interest because interest is calculated as a percentage of the loan amount.
Should you refinance your personal loan?
Sure, you can refinance your loan, but should you? In some instances, refinancing a personal loan can make sense, but it could be the wrong move for your finances at other times.
| When you should refinance | When you shouldn’t refinance |
| When you can get a lower interest rate | When your credit score hasn’t improved |
| When you want to lower your monthly payments or shorten your repayment term | When your loan has a prepayment penalty |
| When you need more money | The fees of a new loan outweigh the savings. |
When you should refinance your personal loan
It might make sense to refinance a personal loan when:
- You can get a lower interest rate. One of the main reasons to refinance a personal loan is to take advantage of a lower interest rate. Refinancing for a lower rate means you’ll spend less money over the life of your loan. You may qualify for a lower interest rate if you’ve worked hard to improve your credit score.
- You want to lower your monthly payments or shorten your repayment term. If you refinance your loan for a longer term (that is, more months than your current loan), it allows you to spread out your payments over time—and thus pay less each month. If your income has changed and you want to repay the loan faster, you could refinance to get a higher monthly payment over a shorter period.
- You need more money. A third reason to refinance a personal loan? You ran out of money. By refinancing for a larger amount, you can pay off your previous loan and still pocket cash to cover bills, emergency expenses, home renovations, or whatever else you have in mind.
When you shouldn’t refinance your personal loan
You probably shouldn’t refinance your loan if:
- Your credit score hasn’t improved. If your credit score is the same as when you first got your loan—or if it’s even lower—you likely won’t qualify for a lower interest rate.
- Your current loan has a prepayment penalty. Refinancing a personal loan means taking out a new loan to pay off the balance of the old loan. Some lenders charge you a fee for paying off your loan early (a prepayment penalty). This alone may make refinancing unappealing.
- The fees of a new loan outweigh the savings. In addition to a possible prepayment penalty for the current loan, a new loan may have an origination fee and a loan application fee; together, these fees might be more expensive than any savings you get out of a lower interest rate with a new loan. Use our personal loan calculator to estimate the total cost of a new loan and see whether it’s worth refinancing.
Recap of the best companies to refinance your personal loan with
About our contributors
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Written by Timothy Moore, CFEI®Timothy Moore is a Certified Financial Education Instructor (CFEI®) specializing in bank accounts, student loans, taxes, and insurance. His passion is helping readers navigate life on a tight budget.
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Edited by Kristen Barrett, MATKristen Barrett is a managing editor at LendEDU. She lives in Cincinnati, Ohio, with her wife and their pack of senior rescue dogs. She has edited and written personal finance content since 2015.