Can you refinance personal loans?


Yes, you can refinance a personal loan by taking out a new loan and using it to pay off an existing one. Whether refinancing makes sense depends on your current loan terms, fees, remaining balance, and how your financial situation or market conditions have changed.

What does it mean to refinance a personal loan?

Refinancing a personal loan means replacing your current loan with a new one that has different terms. The new loan pays off the original balance, and you then repay the new loan according to its terms.

This process doesn’t change the fact that you still owe money—it changes how you owe it. The impact can vary depending on interest rates, loan length, and costs associated with the new loan.

Why do people consider refinancing a personal loan?

People often explore refinancing to adjust how their loan fits into their broader financial picture. Common reasons include:

  • Lower Interest rate: If your credit profile has improved or market rates have shifted, a new loan may come with a different rate.
  • Payment flexibility: Changing the loan term can increase or decrease monthly payments.
  • Simpler repayment: Replacing one loan with another may make repayment easier to track.

These outcomes aren’t guaranteed and depend on the specific terms offered.

What are the pros and cons of refinancing a personal loan?

Refinancing can have both advantages and drawbacks. Looking at them side by side can help clarify whether it’s worth exploring.

Potential pros Potential cons
A new loan may offer a lower interest rate Lower rates aren’t guaranteed and depend on lender criteria
Monthly payments may decrease with a longer loan term Longer terms can increase total interest paid over time
Loan terms can be adjusted to better fit current finances Shorter terms may raise monthly payments
Some loans don’t charge prepayment penalties Fees or closing costs can reduce or offset benefits
Repayment structure may feel simpler or more manageable Applying for a new loan may involve a credit inquiry

The value of refinancing often depends on whether short-term affordability or long-term cost is the higher priority.

When might refinancing not make sense?

Refinancing isn’t always beneficial. It may be less helpful if:

  • Your existing loan already has favorable terms
  • Fees on the new loan reduce or eliminate potential benefits
  • Extending the loan significantly increases total interest paid

Comparing the full repayment amounts—not just the monthly payment—can provide a clearer picture.

Do personal loans have prepayment penalties?

Some personal loans charge a prepayment penalty, which is a fee for paying off the loan early. Many personal loans today do not include this fee, but policies vary by lender and loan agreement.

Reviewing your current loan’s terms can help you understand whether refinancing would trigger any additional costs.

How do lenders generally evaluate refinance applications?

Refinance terms are typically based on a mix of financial and credit-related factors, such as:

  • Credit history and recent credit activity
  • Income and employment information
  • Existing debt obligations
  • Loan amount and remaining balance

Each lender uses its own evaluation criteria, so offers can differ widely.

Key takeaways

  • Refinancing a personal loan replaces your current loan with a new one.
  • It can change interest rates, monthly payments, or loan length, depending on the terms offered.
  • Lower monthly payments don’t always mean lower total borrowing costs.
  • Fees and prepayment penalties can affect the value of refinancing.
  • Comparing full loan terms helps clarify potential tradeoffs. 

Frequently asked questions

Can you refinance a personal loan with the same lender?
 Some lenders allow refinancing with the same institution, while others require a new lender. Policies vary.

Does refinancing a personal loan affect your credit?
 Applying for a new loan may involve a credit inquiry, which can have a temporary impact on your credit profile. Long-term effects depend on repayment behavior and overall credit use.

Can you refinance a personal loan more than once?
 It’s possible to refinance more than once, but each application is evaluated independently, and terms aren’t guaranteed to improve.

Updated: January 2026

 

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Disclosure

This content is general in nature and provided for informational purposes only. This content is not specific to Upstart, except where explicitly stated. This content may contain references to products and services offered through Upstart’s credit marketplace. Upstart is not a financial advisor and does not offer financial planning services.

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*This content is general in nature and provided for informational purposes only. This content is not specific to Upstart, except where explicitly stated. This content may contain references to products and services offered through Upstart’s credit marketplace. Upstart is not a financial advisor and does not offer financial planning services.

Upstart Network, Inc. (NMLS #936133) is not a lender. All loans on its marketplace are made by regulated financial institutions.

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