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How to Refinance a Personal Loan

How to Refinance a Personal Loan

By Matt Diehl • January 18, 2019

Refinancing a personal loan could help you save money on interest, lower your monthly payment and change the terms of your original loan.* Overall it could be a smart financial move.

However, paying off an old loan with a new loan might sound complicated or intimidating.

Here’s some information to help explain when refinancing could make sense and a step-by-step plan from start to finish:

Reasons to refinance a personal loan

  • Your credit has improved — If you’ve raised your credit score since opening your old loan, you might qualify for a lower interest rate on a new loan.
  • You want a fixed interest rate — Moving to a fixed rate from a variable rate can help you save money on interest and budget the payment easier.
  • You need lower monthly payments — Extending your repayment term can lower your monthly payments. However, you might pay more in total interest and be in debt longer.
  • You found a better deal with a new lender — It doesn’t hurt to keep your eyes open for better opportunities. If something comes along, see if it will pay off.

Steps to refinance a personal loan

1. Check your credit report
Two big factors in getting approved for a new loan to use for refinancing can be a strong credit score and on-time payments toward your first loan. If you need a current copy of your credit report, go to You’re eligible to receive a free report from all three nationwide consumer credit reporting companies (Equifax, Experian and TransUnion) every 12 months if requested.1 Once you know where your credit stands, you can either move forward with confidence or take steps to improve your credit score.

2. Shop for the best loan offers
Finding the best offer for refinancing a personal loan is the same as shopping for a credit card or mortgage. Begin by creating a list to compare personal loan companies side-by-side. This can help you identify current interest rates, monthly payments and minimum credit score to qualify. It could also be useful to note which lenders have transaction costs and fees. Once your list is complete, save time (and stress) by letting our online personal loan calculator do the math for you.

3. Get your personal documents ready
Most lenders ask for similar information in their applications. Gather up the following documents to be prepared: proof of identity, proof of residence, proof of income, Social Security card and W2 form.

4. Apply for a refinanced loan
Once your preparation is complete, it’s time to see if you're prequalified. Some lenders let you apply in person or online and give you an answer within minutes. If you get approved, you may be given the option of receiving your funds by paper check or direct deposit. If your application gets denied, ask for specific reasons why. It can help to know how to improve your chances of getting a loan approved if you apply again in the future.

5. Pay off your old loan and make sure it’s closed
When the funds from your new loan become available, pay off your old loan immediately. Some lenders may do this for you but it’s up to you to confirm that it’s closed. Either way, ask your old lender for a “Paid in Full” letter or other documentation for your records. You should also check your credit report to verify the account is closed and satisfied.

6. Manage your new loan
Make note of your new payment date and amount due each month. If your new lender offers automatic payments, signing up could help you avoid potential late fees. You might also check for other convenient services like paperless billing and online account management.

Take it one step at a time

Refinancing a personal loan is a major financial move with some serious benefits. To get the best results, create a checklist and see it through to the end.

* Before you refinance your other debts with a new loan to reduce your total monthly debt payment, you should consider that the new loan may increase both the total number of monthly payments and the total amount paid over the term of the loan.

1. Central Source LLC. “All About Credit Reports. (accessed January 25, 2018).

The information in this article is provided for general education and informational purposes only, without any express or implied warranty of any kind, including warranties of accuracy, completeness or fitness for any particular purpose. It is not intended to be and does not constitute financial, legal or any other advice specific to you the user or anyone else. The companies and individuals (other than OneMain Financial’s sponsored partners) referred to in this message are not sponsors of, do not endorse, and are not otherwise affiliated with OneMain Financial.