Can I use a personal loan to pay off another personal loan?

When refinancing makes sense: If interest rates have dropped since you took your original loan, or if your credit score has improved significantly (improving your eligible APR), refinancing to a lower rate reduces total interest. The math: a $20,000 loan at 22% over 60 months is $553/month and $13,180 in total interest. The same loan refinanced to 14% is $465/month and $7,900 in interest, saving $5,280 total.

When it doesn't make sense: If the new loan has an origination fee that exceeds the interest savings. If you're close to paying off the original loan (you've already paid most of the front-loaded interest). If the new loan extends the term significantly, total interest may increase even with a lower rate.

Prepayment penalties: Before refinancing, check your existing loan agreement for a prepayment penalty. Some lenders (especially in the fair-credit space) charge 1-5% of the outstanding balance for early payoff. This cost must be factored into the refinancing math.

Process: Apply to refinancing lenders exactly as you would for a new loan (pre-qualify, soft pull, compare APRs). If approved, the new lender typically pays off the old lender directly at funding, then you repay the new lender on the new schedule. This is sometimes called a 'direct payoff loan.'

Credit impact: Refinancing creates a hard inquiry, opens a new account (lowering average account age), and closes the old account. The short-term credit impact is similar to taking a new loan. Long-term, paying consistently on the new loan maintains positive history.