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Refinancing Your Personal Loans

Debt Consolidation

By Sarah Megginson, senior editor of money, Finder

Refinancing your personal or car loan

Once you get a loan for a car or personal debt, many of us treat it as “set and forget”. But with a little shopping around, you could get a better deal, different terms, more funds or consolidate other debts with a personal or car loan.

When you refinance a loan, you’re taking out a new loan to replace your existing one. This could be your personal loan or car loan.

There can be several benefits to refinancing, but you also need to be aware of the potential costs (including exit fees on your current loan and application fees for the new loan) before you make a move.

Why should you refinance your loan?

To pay less.

The new loan may offer lower interest rates, or perhaps your credit score has improved and you’re now eligible for a better rate. With a lower rate, the loan becomes cheaper, and you’ll pay less in monthly repayments.

Access to more funds.

You may be keen to borrow a little more. You could refinance and apply for a higher loan amount, with a plan to pay off your existing debts and use the extra funds for something like unexpected dental work, a holiday or renovations. Your current lender may also consider increasing your loan amount.

Debt consolidation.

If you have a few high-interest debts, by consolidating, you can roll them all into a single, low-rate credit account and pay off your other debts. This can help you save money on excess interest and pay the debts off faster.

Different loan terms.

You may want to reduce your monthly repayments by opting for a loan with a longer-term, or you want a shorter term to pay off your loan faster.

What should you consider before refinancing your loan?


There may be early exit fees attached to your current loan, and the new loan may have establishment fees. Work out how much the fees are, and if it’s worth refinancing.

Interest rate and overall cost.

Apart from interest, you should also compare the overall cost of your old and new loan. This is inclusive of all fees and charges, including service fees.

Loan terms.

Consider the cost of a different loan term. If the new loan has shorter terms, your monthly repayments will be higher, but you get to pay off the loan earlier. Longer terms come with lower monthly repayments, but you may potentially pay more in interest. It will also take you longer to pay off the loan.

Type of interest.

You may be switching from a fixed rate to a variable rate, or vice versa. This has implications on your monthly repayments and budget. With a fixed rate, your repayments will remain the same for the duration of the loan. Variable rates fluctuate based on the market rate. This makes it harder to budget for, as you pay less if the rate goes down, or more if the rate increases.

Age of security, if any.

If you’re looking to refinance a car loan, the age of your car may play a role. Consider the current market value of your car and how much it has depreciated since you bought it. If it’s lost a lot of value, you may find it harder to refinance your loan.

Loan features.

There may be loan features you could benefit from, such as free additional repayments and a redraw facility.

How can you refinance your personal loan?

🤔Consider the terms and conditions of your current loan.

These include the exit fees on your current loan and application fees for the new loan.

🔍****Compare loans to find the best loan.

You can use Finder’s comparison tables and product pages to find the loan that ticks all your boxes.

✍****Check eligibility and apply for the new loan.

Make sure you’re eligible to apply for the new loan. You will have to meet credit score, income, residency and age requirements, among others. Include refinancing or debt consolidation as your loan purpose in your new loan application.

🔐****Close old loan account/s.

Now that you have the funds, you can close your old credit account. Your new lender may arrange this for you, or you could get in touch with your previous lender and make arrangements. Ensure the balance has been paid, the account closed, and direct debits cancelled.