Refinancing a personal loan could help you achieve your financial goals, but run the numbers to see if it’s a good idea.
Refinancing a personal loan can help you save interest or lower your monthly payment, but it’s not always a smart financial move. Before seeking personal loan refinancing, you should consider whether it’s a good idea, find out how you can qualify and understand the refinancing process.
When It Makes Sense to Refinance a Personal Loan
Personal loan refinancing may help you save money if you can lower your interest rate or shorten the repayment period. A lower interest rate may be an option if rates have declined, your credit or income has improved since you took out your personal loan, or you didn’t get a good rate on your first loan. Shortening your loan term could result in interest savings, since you’ll be repaying the loan over a shorter period.
However, whether you’re lowering your interest rate, shortening your term or both, make sure your interest savings exceeds any fees you may be charged to refinance, including an origination fee or prepayment penalty.