You can refinance a personal loan by taking out a new loan. Depending on the new interest rate, refinancing personal loans could save you money.
If you’re considering refinancing your loan, you may want to wait until you can secure interest rates lower than your current rates. You may have to work on improving your credit score to achieve those lower rates.
Refinancing a personal loan might be a good idea if you need to lower your monthly payments or need the cash to pay down other debts. Conversely, if you can afford a higher monthly payment, refinancing for a shorter term may mean that you can reduce the total amount spent on interest and pay off your debt sooner. Before applying for a new loan, crunch the numbers to be sure that refinancing makes sense financially even after factoring in the associated fees.
Refinancing a personal loan may initially negatively impact your credit score, but your score could recover over time. Refinancing can help you to lower your interest rate and make it easier to pay off debt, which can ultimately help you improve your credit.
Yes — if you’re going through financial hardship and struggling to meet your minimum monthly payments, your personal loan lender may be willing to renegotiate the details of your loan with you. If you find yourself in that position, it’s best to contact your lender as soon as possible so that you can avoid missing payments.