How to Refinance a Personal Loan
Refinancing a personal loan can be a smart way to lower your interest rate if you qualify, reduce your monthly payment, pay off your debt faster, or get more cash. Whether your credit score has improved or you're simply looking for better loan terms, understanding whether or not to refinance a personal loan is key to saving money on interest and optimizing your financial health. Thinking about refinancing your personal loan? Here's what to know about the refinancing process so you can make the best decision for you.
Can you refinance a personal loan?
Yes, in general, personal loans can be refinanced, but it depends on terms of the original loan with the lender. Some loans can be refinanced with the original lender or a third party lender, while some lenders do not offer refinancing or allow for refinancing in the loan terms. For example, certain eligible personal loans through Upgrade can be refinanced but that’s not the case with every loan provider or lender.
What does it mean to refinance a personal loan?
Refinancing means taking out a new loan to pay off your existing one. Ideally the new loan has better terms and lower rates, too. Whether you’re looking for a lower rate, smaller monthly payments, or a faster payoff, refinancing may help give you a chance to reset your loan rates and terms to better fit your financial goals.
How to Refinance a Personal Loan
1. Check current personal loan rates
Personal loan rates don’t change dramatically, but it’s smart to see where they stand now. If today’s average rates are higher than when you first borrowed, refinancing might not save you money on interest.
2. Pre-qualify with multiple lenders
See what new rates and terms you might qualify for if the lender allows you to see your offers without impacting your credit score. Pre-qualifying can help give you a clearer picture of your options and helps you compare offers against your current loan terms.
3. Factor in the cost of refinancing
Look at the new loan’s APR and estimated monthly payments to see if you’ll actually save on interest. Some lenders charge an origination fee which means your new loan, after origination fees are deducted, needs to be large enough to pay off the old one entirely.
4. Apply for the new loan
Ready to move forward? Submit an application and provide any necessary documents the loan provider requires. The lender will do a hard credit check, which could lower your credit score by a few points temporarily.
5. Use the new loan to pay off the old one
Some lenders will send the funds to your bank account for you to repay your old loan, while others send the loan funds directly to your prior lender to pay off your current loan. Upgrade, for example, will pay off your current loan for you directly to your prior lender. Either way, make sure those funds go toward closing out your old loan.
6. Confirm your old loan is fully paid off
Log in to your account and double-check that your previous loan balance is zero. This helps you avoid surprise fees or missed payments.
Tip: Keep making payments on your old loan until you see a $0 balance to ensure you don’t miss a payment. Even if your new loan is in process, a missed or late payment can hurt your credit score. Some lenders offer a short grace period—but it’s better to not risk it.
7. Start paying your new loan
Once your new loan is active, set up automatic payments so you avoid missing one. It’s one of the easiest ways to help stay on track with payments.
Ready to refinance?
Some Upgrade customers with personal loans can refinance their loans.* Check your refinancing options with no impact to your credit score to see if it makes sense for you.
*Personal loans made through Upgrade feature Annual Percentage Rates (APRs) of 7.99%-35.99% and a 1.85%-9.99% origination fee, which is deducted from the loan proceeds. Lowest rates require Autopay and paying off a portion of existing debt directly. For certain discounts, collateral may be required. Repayment terms from 24 to 84 months. For example, if you receive a $10,000 unsecured loan with a 36-month term and a 17.59% APR (which includes a 13.94% yearly interest rate and a 5% one-time origination fee), you would receive $9,500 and would have a required monthly payment of $341.48. Over the life of the loan, your payments would total $12,293.46. The APR and other terms of your loan may vary and you may not be presented with multiple offers. If offered, your loan terms, including your rate, will depend on credit score, credit usage history, loan amount, and other factors. Late payments or other fees, as noted in your Borrower Agreement, may increase the cost of your fixed rate loan. Certain loan offers may not be available in all states.