How to refinance your personal loan

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Refinancing your personal loan can help you consolidate your debt or save you money on your loan.

Whether you're becoming overwhelmed with debt spread across different accounts or you've found a deal that will save you money, refinancing a personal loan can reduce what you're paying or help you to better manage your debts.

If you are considering refinancing it's important to understand everything that's involved.

How does personal loan refinancing work?

Refinancing a personal loan works much in the same way as refinancing a home loan. You apply for a loan which covers the amount you have left to pay on your current loan/s and then you use the new loan to pay off the original one. Some lenders can organise the funds to be paid to your existing loan account, saving you the hassle.

You still have the same amount of debt, but you may save money by consolidating your debt or if the new loan offers better terms, lower fees or a reduced interest rate.

Pepper Money Unsecured Fixed Rate Personal Loan

Pepper Money Unsecured Fixed Rate Personal Loan


9.99 % p.a.

fixed rate


9.99 % p.a.

comparison rate

  • Fast turnaround
  • Loans amounts from $5,000
  • Competitive fixed rate
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Pepper Money Unsecured Fixed Rate Personal Loan

Apply for a Pepper Money Unsecured Fixed Rate Personal Loan and get competitive interest rate offer with a flexible range of repayment options and no monthly fees.

  • Interest rate from: 9.99% p.a.
  • Comparison rate: 9.99% p.a.
  • Interest rate type: Fixed
  • Application fee: $0
  • Minimum loan amount: $5,000
  • Maximum loan amount: $50,000
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Ready to refinance? Here's a selection of loans

Why should I refinance my personal loan?

There are a few reasons why people choose to refinance their personal loans, but really it boils down to either finding a better deal or consolidating debts.

You've found a better deal

  • If you think you've found a better deal it might be worth using a personal loan repayment calculator, such as the one below, to compare the two loan options and see if the move will be worth it. When comparing loans you shouldn't just focus on interest rates, but also look at ongoing fees and repayments as well as loan establishment costs. You should also consider the features of a loan to make sure they suit your needs. For example, if you sometimes make additional repayments you should confirm whether this is allowed with the new loan.

You're consolidating debt

  • If you are refinancing a personal loan to consolidate a debt then you will need to do a few more calculations. First, you should calculate the total monthly repayments for each of your existing loans. This should include fees, rates and any other charges you incur from your loan. You should then compare this figure to what you can expect to pay for the new consolidated loan. Using a personal loan repayment calculator as mentioned above can simplify this process.

Calculate the difference

If you've already compared personal loans and would like to compare the two side by side, we've provided a loan comparison calculator below.

How do I actually refinance my personal loan?

  1. Compare your personal loan options. Take a look at what personal loans are available to see if you can get a better deal.
  2. Calculate the costs of refinancing. Include break and exit fees and the establishment fees for your new loan to ensure it will be worth your while.
  3. Apply for the new personal loan. If you meet the criteria for the new personal loan, submit your application. You may have to note that your loan purpose is to refinance or consolidate.
  4. Pay out your current loan with the funds from the new loan. If the loan is for debt consolidation your lender may be able to arrange this for you, but for other lenders, you will need to transfer the funds from your new loan into your current personal loan account.
  5. Make sure the old loan is closed. Confirm with your previous lender that your loan account is closed and you have no balance owing.

What are the costs of refinancing a personal loan?

Banks and lenders don't want you jumping their ship every time you see a cheaper rate from a competitor, which is why refinancing comes with a cost. Here are some fees to take into account when you're calculating the costs of refinancing:

  • Application fees could set you back as much as $300, so confirm if you will be charged a fee on the new loan.
  • Early repayment fees are sometimes charged by lenders and can put a considerable dent in the savings you could make from switching.
  • Ongoing fees are also a cost that should be taken into consideration. These fees can add up quite quickly and may offset a lower rate offered by the new loan.

Is it worth refinancing?

Refinancing costs outweighing

The value of refinancing will depend on your current personal loan and also your financial situation. To determine the value of refinancing you should calculate what your current loan/s are costing you and then compare that to the cost of your new loan. Remember to include the initial costs for setting up a loan and also the interest you will save over the life of the loan, not just in the initial period.

You should also consider other features of the loan when deciding whether to refinance. For example, if you are refinancing from a fixed rate loan to a variable rate loan you may save money as long as the variable rate lasts, but these rates are called variable for a reason. The rate could change and then you may discover you would have been better off staying with the first loan.

The same goes for other features of the loan, for example, you may be used to making additional repayments to pay your loan back sooner, but the new loan you refinance to may not have this option, or may charge you for it.

When determining the value of refinancing, remember to take all aspects of both loans into consideration.

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