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How much could you save by refinancing your personal loan?

Compare personal loan interest rates, fees, features and benefits to find options that may better suit your needs when you refinance.

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There are a number of reasons you might consider refinancing your personal loan, and for many borrowers it could be an advantageous move. But as with any financial commitment, it’s a good idea to do your research and carefully consider your decision before jumping ship.

Can I refinance my personal loan?

In most situations, refinancing your personal loan is entirely possible and is a fairly similar process as you would have experienced when applying for your current loan. The way it works is that a borrower will take on a new loan to pay off one or more outstanding debts, and then begin to make repayments on the new loan.

If you are considering refinancing your existing loan, it’s important to keep in mind that the process and any potential restrictions will likely differ from one Australian lender to the next, and may involve fees and charges such as early exit penalties and upfront or establishment fees.

Consider checking with both your current lender and preferred new lender to see what may be applicable to you personally, so that you can do the maths and determine whether refinancing is the right move for you. 

RateCity's Personal Loan Repayment Calculator might come in handy when comparing repayment amounts.

What does personal loan refinancing mean?

Refinancing a personal loan is similar to refinancing a home loan. You’re applying for a new loan, either with your current lender or a different one, that will cover the remaining debt and any fees and charges associated with switching.

There can be penalties involved with refinancing, such as break fees for those on fixed rate loans, switching fees for refinancing with the same lender, and application fees when applying for a new loan.

Why might you consider refinancing a personal loan?

Although personal loans may not be as substantial as home loans, you might still consider refinancing opportunities as a means of consolidating your debts, lowering repayments or accessing more funds.

Let's explore some of the reasons a borrower may consider refinancing their personal loan.

To consolidate debts

If you have multiple debts, say for example a personal loan and a couple of credit cards, refinancing to consolidate all of these into a single personal loan could be beneficial. 

Managing the repayments for one debt could prove to be much easier than staying on top of multiple. Additionally, personal loan interest rates can often be lower than credit card rates, meaning debt consolidation could result in less money spent on interest charges.

To access reduced interest rates

It’s no secret that the market tends to fluctuate, and while you may have been given a good deal on your loan when you were initially approved, there could now be more attractive options available. It's important to have a good understanding of the pros and cons of both variable interest rate loans and fixed interest rate loans, particularly if you are considering refinancing for this purpose.

To access better features

Perhaps a redraw facility, or similar, didn’t mean much to you when you first got your personal loan, but now you’ve reconsidered. Refinancing to a loan that offers the extra features that are important to you could improve your borrowing experience and may even potentially save you money.

To extend the loan term

If your financial situation has changed and you are finding it difficult to meet your current repayments, you may consider refinancing to a new personal loan on a longer/different term to lower your fortnightly or monthly repayments. 

Keep in mind that even though your regular repayments will be reduced, longer loan terms generally mean paying more in interest charges over the life of the loan.

To take advantage of an improved credit score

If you have had consistently good credit behaviour since you initially took on your personal loan, there’s a chance your credit history may have improved, and in turn, more low rate loans may now be available to you. 

If this is the case, it could be worthwhile making the switch to a loan with a lower interest rate if it means you could save money on interest charges over the life of the loan. Be sure to factor in any fees and charges you may incur by refinancing when doing your calculations in order to get a true understanding of your potential savings.

Important features to consider when refinancing a personal loan

Understanding the various components that make up a personal loan can help you to make a more informed decision when it comes to refinancing. There are numerous factors to consider including:

  • Interest rate: This will either be fixed or variable and will determine how much you will be charged on top of the principal amount borrowed.
  • Comparison rate: A combined total estimate of the cost of the loan including the interest rate plus any upfront or ongoing costs. Take note of different comparison rates as well as interest rates when comparing your options.
  • Fees and charges: These can include loan application fees, establishment fees, monthly fees, early repayment fees, redraw fees and other ongoing fees.
  • Secured/unsecured loan agreement: If the loan is secured, you will need to provide collateral in the form of an asset such as your home or a new car. Unsecured personal loans do not require collateral but often have higher interest rates than secured loans.
  • Extra repayments: This feature will determine whether or not you can make payments on your loan in addition to your regular repayments.
  • Redraw facility: Loans that accept extra repayments may also allow you to redraw this money if you’re ahead in repayments and in need of some cash.

Will refinancing a personal loan affect my credit score?

Refinancing a personal loan can impact your credit score. As with most loans, if you are knocked back or make multiple applications over a short period, your credit score may be reduced.

In contrast, if you’re refinancing your personal loan as a way to consolidate your debts this could help to improve your credit score by reducing the amount of open loans you hold and lowering repayments.

How to refinance a personal loan?

RateCity's Personal Loan Marketplace may assist you in seeking out a potential deal. Your search includes a free credit score check, offering rate estimates based on your credit score range and a list of tailored products you’re likely to be approved for.

Beyond this, there are a few important steps to take in order to successfully refinance a personal loan:

  1. Search and compare a range of personal loan options, including negotiating terms with your current lender
  2. Weigh up any applicable fees and charges with the benefits and potential savings you’d make by switching your personal loan
  3. Contact the new lender to make an application to refinance
  4. The lender will approve or reject your application based on your financial circumstances, your credit rating, and their terms and conditions
  5. Pay any required exit fees to your old lender and any upfront fees to your new lender
  6. Ensure your old loan account has been closed and begin making repayments on your new personal loan

Is refinancing a personal loan a good idea?

Refinancing a personal loan can offer a range of benefits, from lower interest rates and reduced repayments to improved loan features and credit score advantages. 

If your lifestyle, financial or personal circumstances have changed since you first applied for your personal loan, and you’ve found a deal that might be better suited to your needs, you may want to consider refinancing, either with your current lender or a new one.

Don’t forget to consider all the potential risks associated with refinancing and ensure that you’re in a financial position where you can comfortably afford to cover the costs of your new loan.

If you’re not sure whether it’s a good idea for you to refinance right now, consider contacting a financial advisor for personal financial assistance that directly addresses your circumstances.


  • You could make your finances more manageable if you are refinancing to consolidate debts.
  • You may save money on interest charges if you refinance to a loan with a more competitive rate.
  • You might be able to access better features that improve your borrowing experience.


  • Early exit penalties and establishment fees could add up and outweigh any potential savings.
  • If you refinance to a loan on a longer term, you may end up paying more in interest charges over the life of the loan.
  • Refinancing your personal loan can take considerable time and effort, so it’s a good idea to factor this in when deciding whether it’s right for you.
This article was reviewed by Personal Finance Editor Mark Bristow before it was published as part of RateCity's Fact Check process.

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^Words such as "top", "best", "cheapest" or "lowest" are not a recommendation or rating of products. This page compares a range of products from selected providers and not all products or providers are included in the comparison. There is no such thing as a 'one- size-fits-all' financial product. The best loan, credit card, superannuation account or bank account for you might not be the best choice for someone else. Before selecting any financial product you should read the fine print carefully, including the product disclosure statement, target market determination fact sheet or terms and conditions document and obtain professional financial advice on whether a product is right for you and your finances.