Oct 03, 2025
If you are continuing to make monthly payments on a loan you obtained years ago, your payments are based on the terms you qualified for when you began the loan.
But did you know that it’s possible to refinance a personal loan? Like home loan refinancing, personal loan refinancing could help you lower the interest rate, change your loan term, and even borrow more money.
Personal loan refinance involves using a new personal loan to pay off the balance of an existing loan. Your refinanced loan is closed and the new loan becomes your current loan with its new loan amount, loan term, interest rate, and monthly payment amount.
Your current lender may have loan offers for you that could allow you to pay off your existing loan (and even take out more money), or you may prefer to check with multiple lenders to find a personal loan option that will best support your financial situation.
Ideally, your new personal loan will have more favorable terms than your existing loan. As with your original personal loan, your loan approval odds and repayment terms will depend on your credit report and credit history.
It’s common for financial situations to change over time. When they do, refinancing a personal loan could help set you up with the best personal loan for your current needs.
There are several steps to refinancing a personal loan.
1. Decide how much you want to borrow
It might seem obvious, but before you shop for a new loan, decide how much you want to borrow. Figure out how much is due on your existing loan and if you want to borrow more money on top of that. It can be easy to assume that the lowest interest rate is always better, but that doesn’t give you a full picture of cost. Don’t forget to add in any prepayment penalties your lender might charge, and any other costs your loan terms may include.
2. Check your credit score
You’ll want to check your credit score to see if it has improved since you took out the original loan. Lenders rely on credit scores to give them a measure of your creditworthiness. A higher score could help you get a lower interest rate on your loan.
There are many ways to improve your credit score. Here are some of the most common ones:
For more ideas, read 8 Facts You Need to Know About Your Credit Score.
3. Shop around for a new loan
Some lenders, like Discover Personal Loans, let you check your rate with a “soft inquiry” or “soft pull.” A soft pull helps you see how much money you might be able to borrow, the interest rate, and the repayment term without any impact on your credit score.
Be sure to look for loans that don’t have fees. Any extra fees can increase your monthly payments. Some lenders charge origination fees and other costs, all of which add to the total cost of your loan. Discover Personal Loans doesn't charge fees of any kind, ever.
4. Apply for a new loan
Gather all the documents you will need to submit to apply for a new loan. You might need your Social Security number, pay stubs, bank statements, and tax returns. Organizing this information before you start the application will save you time.
For more details on the application process, read How to Apply for a Personal Loan.
5. Make payments on your loans
When you get approved for your new loan, you will want to use it to pay off your existing loan right away. That makes it less likely that you’ll have two open loans and two separate payments for any period of time.
Did you know? Discover Personal Loans can pay many of your creditors directly or send the money straight to your bank account. This means you don’t have to wait to get the money in your account and then pay your existing loan balance manually.
It’s often a good idea to set up automatic payments for your new loan, too. That can help you stay on top of your payments, so you never miss one.
Another option is to pay off your balance with a different type of loan. For example, a cash out mortgage refinance is a secured loan that uses the equity in your home to pay off your original loan. That means you could lose your collateral—your home, in this case—if you have trouble repaying the new loan. That’s why refinancing a personal loan with another unsecured personal loan may be a better course of action.
If you’re having trouble making your current loan payments and refinancing isn’t an option, your lender may have a solution for you, especially if you’re in good standing with them.
If you're still paying off an unsecured personal loan from a few years ago, but your current financial situation has needs that that original loan doesn't cover, a refinance loan might help. The terms of your loan offer will depend on your credit history, and other details--but with the right refinance personal loan you could address everything from debt consolidation to improved monthly cash flow. And that could help you reach your financial goals faster
Articles may contain information from third parties. The inclusion of such information does not imply an affiliation with the bank or bank sponsorship, endorsement, or verification regarding the third party or information.
The information provided herein is for informational purposes only and is not intended to be construed as professional advice. Nothing contained in this article shall give rise to, or be construed to give rise to, any obligation or liability whatsoever on the part of Discover, a division of Capital One, N.A., (Discover) or its affiliates.
Personal loan refinancing FAQs
If you need short- or long-term payment assistance, your lender may be able to help depending on your personal financial situation. Whatever the challenge, call your lender first. Explain your situation and ask about their repayment assistance program. Note that some lenders may only allow you to get payment relief if your account has been active for a minimum period of time.
You may also consider addressing your debt with an independent party in the case of financial hardship. The National Foundation for Credit Counseling provides credit and debt counseling including guidance and solutions to financial issues and a plan to prevent future problems specific to your situation.
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