Many or all companies we feature compensate us. Compensation and editorial research influence how products appear on a page. Personal Loans Can You Refinance a Personal Loan? Updated Jan 22, 2024   |   8-min read   |   This article has been reviewed by a Certified Financial Planner™ for accuracy. Written by Timothy Moore Written by Timothy Moore Expertise: Bank accounts, credit cards, taxes, insurance, personal loans Timothy Moore is a personal finance and travel writer specializing in bank accounts, credit cards, taxes, and insurance. His passion is helping readers navigate life on a tight budget. Learn more about Timothy Moore Reviewed by Erin Kinkade, CFP® Reviewed by Erin Kinkade, CFP® Expertise: Insurance planning, education planning, retirement planning, investment planning, military benefits, behavioral finance Erin Kinkade, CFP®, ChFC®, works as a financial planner at AAFMAA Wealth Management & Trust. Erin prepares comprehensive financial plans for military veterans and their families. Learn more about Erin Kinkade, CFP® Personal loans can be a terrific 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. Table of Contents Skip to Section Can you refinance a personal loan?Where to refinance a personal loanWhen can you refinance a personal loan?Can you refinance a personal loan for more money?Should you refinance your personal loan? 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. Credit score: Our expert’s advice Erin Kinkade CFP® 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 and applying for new personal loans within 45 days so the credit checks count as one 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!). 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. Tip 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. LenderBest forEditorial rating (out of 5)Rates (APR)CredibleBest marketplace5.0Starting at 5%SoFiBest for good credit5.0Starting at 5%UpgradeBest for fair credit4.9Starting at 5%LightStreamBest for excellent credit4.8Starting at 5%UpstartBest for thin (little to no) credit4.8Starting at 5% Credible – Best marketplace View Rates LendEDU rating: 5.0 out of 5 Access to multiple lenders through one platformEasily compare rates and termsStreamlined process with no impact on credit score Credible is ideal for those who want to explore their options. Because Credible is a marketplace, borrowers can compare offers from different lenders, ensuring they find the best terms for their refinancing needs. The platform is user-friendly, making the process of shopping for a refinance loan efficient and straightforward. SoFi – Best for good credit View Rates LendEDU rating: 5.0 out of 5 Competitive interest ratesNo origination fees or prepayment penaltiesMember benefits, including unemployment protection Refinancing with SoFi is an excellent choice for those with good credit looking to lower their interest rates or alter their loan terms. SoFi’s refinancing options don’t include an origination fee or prepayment penalties, so you won’t pay a fee for potential savings. With unique member benefits, including unemployment protection and financial advising, borrowers can feel relief knowing SoFi is on their side during repayment. Upgrade – Best for fair credit View Rates LendEDU rating: 4.9 out of 5 Tailored options for borrowers with fair creditQuick and simple application processOffers the potential to reduce interest rates and consolidate debt Upgrade provides a viable debt consolidation option for those with fair credit, focusing on making the process straightforward and accessible. It can be ideal for consolidating high-interest debts into a single more manageable loan, potentially reducing the overall interest burden and streamlining payments. Upgrade can coordinate sending the funds from your new loan to previous creditors to ensure your old loan is paid off. LightStream – Best for excellent credit View Rates LendEDU rating: 4.8 out of 5 Low interest rates for high-credit borrowersNo fees and no prepayment penaltiesOffers a Rate Beat program LightStream is a top choice for individuals with excellent credit, offering some of the lowest interest rates. Its Rate Beat program further ensures competitive rates, appealing to borrowers looking for the lowest rate. 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. Upstart – Best for thin (little to no) credit View Rates LendEDU rating: 4.8 out of 5 Uses AI to determine eligibilityFlexible terms and optionsQuick and efficient application process Upstart is an innovative choice for those with a thin credit file. Using artificial intelligence to evaluate eligibility allows Upstart to look beyond a borrower’s credit score to determine an approval decision. This can benefit borrowers who might not qualify for a new loan based on traditional credit scoring methods. 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. Is it the right time to refinance your personal loan? Our expert weighs in Erin Kinkade CFP® 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.) 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. Tip 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 refinanceWhen you shouldn’t refinanceWhen you can get a lower interest rateWhen your credit score hasn’t improvedWhen you want to lower your monthly payments or shorten your repayment termWhen your loan has a prepayment penaltyWhen you need more moneyThe 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.