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.

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Why might I consider refinancing my personal loan?

Some of the reasons a borrower may consider refinancing their personal loan include the following.

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 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.

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.

What are the main features to look for when refinancing a personal loan?

  • Interest rate: This will either be fixed or variable and will determine how much you will be charged in interest on the loan 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: 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.

How do I refinance my personal loan?

  1. Search and compare available personal loan options.
  2. Consider checking out whether RateCity's Personal Loan Marketplace could find you a potential deal. This could minimise your chance of being rejected and hurting your credit score.
  3. Weigh up any applicable fees and charges with the benefits and potential savings you’d make by switching your personal loan.
  4. Contact the new lender to make an application to refinance.
  5. The lender will approve or reject your application based on your financial circumstances, your credit rating, and their terms and conditions.
  6. Pay any required exit fees to your old lender and any upfront fees to your new lender.
  7. Ensure your old loan account has been closed and begin making repayments on your new personal loan.
What are the pros and cons of refinancing a personal loan?
  • 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.

Frequently asked questions

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

What is the average interest rate on personal loans for single parents?

Like other types of personal loans, the average interest rate for personal loans for single parents changes regularly, as lenders add, remove, and vary their loan offers. The interest rate you’ll receive may depend on a range of different factors, including your loan amount, loan term, security, income, and credit score.

Are there alternatives to $2000 loans?

If you need to borrow $2000 or less, alternatives to getting a personal loan or payday loan include using a credit card or the redraw facility of your home, car or personal loan.

Before you borrow $2000 on a credit card, remember that interest will continue being charged on what you owe until you clear your credit card balance. To minimise your interest, consider prioritising paying off your credit card.

Before you draw down $2000 in extra repayments from your home, car or personal loan using a redraw facility, note that fees and charges may apply, and drawing money from your loan may mean your loan will take longer to repay, costing you more in total interest.

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

What is a secured bad credit personal loan?

A bad credit personal loan is 'secured' when the borrower offers up an asset, such as a car or jewellery, as collateral or security. If the borrower fails to repay the loan, the lender can then seize the asset to recoup its losses.

Can single mothers get personal loans online?

Many lenders offer online applications for personal loans, which can be convenient for borrowers who have busy lives. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

Can I get a $2000 loan on Centrelink?

If more than half of your income comes from Centrelink benefits, it may be more difficult to have a $2000 loan application approved. Many lenders will check if you can afford a loan’s repayments on the income from your job before they’ll approve an application, and many won’t count Centrelink payments when assessing your income for this purpose.

Some lenders may offer $2000 loans to borrowers on Centrelink – consider contacting potential lenders to check before applying.

What causes bad credit ratings/scores?

Failing to repay loans and bills will damage your credit score. So will falling behind on your repayments. Your credit score will also suffer if you apply for credit too often or have credit applications rejected.

Can I get a fast loan with bad credit?

Some lenders offer fast loans to borrowers with bad credit. Providers of small payday loans of up to $2000 or medium amount loans of up to $5000 may have no credit checks, though these lenders will usually want to confirm you can afford its loans on your income.

How can I improve my credit rating/score?

Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising loan applications, clearing up defaults and paying bills on time.

Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.

If you want to fix an error, the first thing you should do is speak with the credit reporting body, which may take care of the problem or contact credit providers on your behalf.

The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be the Australian Financial Complaints Authority (AFCA).

AFCA provides consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.

What's a credit report?

A credit report is a record of your credit history, which covers your credit enquiries, borrowings and your repayments. The report will include information about any bankruptcies or other relevant legal judgements. It will also include biographical information such as your address, date of birth, driver's licence number and employment history. 

Can you refinance a $5000 personal loan?

Much like home loans, many personal loans can be refinanced. This is where you replace your current personal loan with another personal loan, often from another lender and at a lower interest rate. Switching personal loans may let you enjoy more affordable repayments, or useful features and benefits.

If you have a $5000 personal loan as well as other debts, you may be able to use a debt consolidations personal loan to combine these debts into one, potentially saving you money and simplifying your repayments.

Can I get a $4000 personal loan if I’m unemployed or on Centrelink?

Before most providers of personal loans or medium amount loans will approve an application, they’ll want to know you can afford the loan’s repayments on your current income without ending up in financial stress. Several lenders don’t count Centrelink benefits when assessing a borrower’s income for this purpose, so these borrowers may find it more difficult to be approved for a loan.

If you’re unemployed, self-employed, or if more than 50% of your income come from Centrelink, consider contacting a potential lender before applying to find out whether they accept borrowers on Centrelink.

Should I get a fixed or variable personal loan?

Fixed personal loans keep your interest rate the same for the full loan term, while interest rates on variable personal loans may be raised or lowered during your loan term.

A fixed rate personal loan keeps your repayments consistent, which can help keep your budgeting consistent. You won't have to worry about higher repayments if your rates were to rise. However, on a fixed loan you’ll also potentially miss out on more affordable repayments if variable rates were to fall.

What is a bad credit personal loan?

A bad credit personal loan is a personal loan designed for somebody with a bad credit history. This type of personal loan has higher interest rates than regular personal loans as well as higher fees.

How are credit ratings/scores calculated?

Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.

They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.

Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (i.e. because it has reached its expiry date).

What do single mothers need to apply for a personal loan?

Like other personal loan applicants, single mothers will likely need to provide a few documents to any potential lender, such as personal identification, bank statements (savings, loans, credit cards), proof of address, and proof of income (payslips, tax returns).

What is a personal loan?

A personal loan sits somewhere between a home loan and a credit card loan. Unlike with a credit card, you need to sign a formal contract to access a personal loan. However, the process is easier and faster than taking out a mortgage.

Loan sizes typically range from several hundred dollars to tens of thousands of dollars, while loan terms usually run from one to five years. Personal loans are generally used to consolidate debts, pay emergency bills or fund one-off expenses like holidays.

Do $4000 loans have no credit checks?

Many medium amount loans for $4000 have no credit checks and are instead assessed based on your current ability to repay the loan, rather than by looking at your credit history. While these loans can appear attractive to bad credit borrowers, it’s important to remember that they often have high fees and can be costlier than other options.

Personal loans for $4000 are more likely to have longer loan terms and will require a credit check as part of the application process. Bad credit borrowers may see their $4000 loan applications declined or have to pay higher interest rates than good credit borrowers.