NEW YORK CITY, NY / ACCESS Newswire / September 28, 2025 / Refinancing a personal loan may seem like a great way to save money, but it's not always the right choice for everyone. Before diving in, it's important to understand what it means to refinance a personal loan and when it's worth considering.
Keep reading to explore the benefits and potential downsides of refinancing and how to decide if it's the right move.
What does refinancing a personal loan mean?
Refinancing a personal loan involves taking out a new loan, sometimes with a new lender, to replace an existing loan. Ideally, the new loan has better terms, like a lower interest rate or a different repayment period, making it easier to manage monthly payments and possibly saving money over time.
It's good to note that refinancing isn't always cost-free - there may be fees involved, like an early repayment penalty on the original loan. So, it's wise to weigh any extra costs against the potential benefits before deciding.
Why do people refinance personal loans?
There are a few common reasons why people look into refinancing a personal loan.
Reduce monthly payment: For one, it might offer the chance to reduce the monthly payment, especially if the borrower's financial situation has changed since the original loan was taken out. For example, if income has decreased, a borrower may prefer a longer loan term with smaller payments each month. But this means it's likely the borrower will end up paying more in interest due to extending the time to pay the loan off - and if the interest rate or annual percentage rate (APR) for the new loan is only slightly lower than the original costs, there may not be any actual savings.
Increased credit score: Refinancing is also an option if the borrower's credit score has improved. With a better score, they may qualify for a lower interest rate, which may reduce the total cost of the loan.
Consolidate debt: Another reason is consolidating other debts. By refinancing, they roll several debts into one, ideally with a lower interest rate.
Switching to a different lender: Sometimes, people refinance simply because they're not happy with their current lender. Maybe the customer service isn't great, or the lender doesn't offer as much flexibility with payments. Refinancing could give borrowers a fresh start with a new lender that may be more accommodating.
How to determine if refinancing is the right choice
So, how can a borrower decide if refinancing is worth it? First, they should consider their financial goals.
Next, they should compare the terms of the new loan to their existing loan. If the new loan offers a lower rate, shorter term, or better monthly payments without too many fees, it could be a smart choice. It's also a good idea to first check their credit score and see if they're likely to prequalify for more favorable terms.
Lastly, reviewing the costs involved is essential. The borrower might want to think twice if there are refinancing fees or prepayment penalties and they are high. Sometimes, the cost of refinancing outweighs the potential savings, so it's crucial to do the math.
Refinance wisely
Refinancing a personal loan could be a valuable tool, but it's not a one-size-fits-all solution. The costs and potential impact must be taken into account.
With a little research, a borrower can make an informed decision and determine if refinancing is the best way to achieve their financial goals.
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About OneMain Financial
OneMain Financial is the leader in offering nonprime customers responsible access to credit and is dedicated to improving the financial well-being of hardworking Americans.
CONTACT :
Sonakshi Murze
Manager
sonakshi.murze@iquanti.com
SOURCE: OneMain Financial
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