Can I refinance a personal loan to get a lower interest rate?

Refinancing a personal loan is mechanically simple: you apply for a new personal loan, use the proceeds to pay off the old loan in full, and then repay the new loan. The economic case requires the new loan's total cost (APR multiplied over the remaining term, plus any origination fee) to be lower than continuing the old loan.

The best candidates for refinancing are borrowers whose credit score has improved 40+ points since the original loan (common after 12-18 months of on-time payments), or who took a high-rate loan in a past emergency and now qualify for prime pricing.

Before applying, run the math: (old remaining balance) x (old APR - new APR) / 12 x remaining months = approximate monthly saving. Subtract any origination fee on the new loan (typically 1-8% of principal). If the net saving over the remaining term exceeds the fee, refinancing pays.

Watch for prepayment penalties on the old loan. Most modern personal-loan agreements do not include them, but confirm in your original loan agreement before proceeding.

The application process is identical to a new loan: soft-pull pre-qualification first, then a hard inquiry if you accept an offer. Your credit score will absorb the hard inquiry (a few points) and recover within a few months of on-time payments.