Check out personal loan refinancing options. Learn how you can repay your existing personal loan with a new loan that comes with better terms.
Personal loan refinancing means replacing your existing loan with a new one that offers better terms. You take a fresh loan to pay off the current one, usually to get a lower interest rate, reduced EMI, or better repayment terms.
Many borrowers opt for personal loan refinancing when:
EMIs become difficult to manage due to high monthly payments
Interest rates have dropped, allowing them to save on loan costs
Another lender offers better terms, such as a lower interest rate or a longer repayment period
There are several banks and NBFCs providing personal loan refinancing options in India. Here are some of the top lenders who offer to refinance your personal loans:
Lender |
Interest Rate Range (p.a.) |
Key Benefits |
HDFC Bank |
10.85% – 21% |
|
ICICI Bank |
10.85% - 16.65% |
|
Bajaj Finserv |
10% – 31% |
|
Tata Capital |
11.99% – 29.99% |
|
Indiabulls |
Starting at 13.99% |
|
Disclaimer - The details mentioned are subject to change at the lender’s discretion.
Refinancing your personal loan can be a smart choice in certain situations. Here are some reasons why you might consider it:
If another lender offers a better deal on interest rates, refinancing can help you reduce your EMI and overall loan cost
If your earnings have grown significantly, you might want to repay the loan faster. Refinancing allows you to choose a shorter tenure, helping you clear your debt sooner.
A higher credit score can make you eligible for better loan terms, such as lower interest rates and reduced processing fees. Refinancing at this stage can help you secure a better deal.
If your EMIs are too high, refinancing can allow you to extend the loan tenure, making monthly payments more manageable
If you wish to add or remove a co-borrower, refinancing creates a new loan agreement, allowing you to update the loan structure as needed
Here are some key types of refinancing options available to you:
Adjusts your interest rate, loan term, or both without changing the loan amount. For example, switching from 12% interest for 5 years to 10% for 3 years can lower costs.
Lets you borrow more than your current loan balance and take the extra amount in cash. If you owe ₹1 Lakh but qualify for ₹1.5 Lakhs, you get ₹50,000 for other expenses.
Allows you to make a lump sum payment to lower your loan balance. If you owe ₹2 Lakhs and pay ₹50,000 upfront, your new loan will be for ₹1.5 Lakhs, reducing EMIs.
A hassle-free process with minimal paperwork and no credit check. Best for borrowers with a good repayment history.
Refinancing your personal loan involves a few key steps to ensure you get better terms and save on interest.
Here’s what you need to do:
1. Assess Your Needs
Calculate how much you need to borrow. Avoid taking extra, as a higher loan means more repayment
2. Talk to Your Current Lender
Check if they can offer better terms or waive prepayment penalties before switching
3. Compare Lenders
Look for better interest rates, tenure, and benefits. Read reviews and contact lenders to assess service quality
4. Check Your Credit Score
A higher score improves approval chances and helps secure better loan terms
5. Apply for Refinancing
Submit your application online or visit the lender’s branch for assistance
Refinancing your personal loans come with both pros and cons. You can get the option to consolidate multiple loans and get off burden, but at the same time, you also have to pay certain charges for processing.
Here are some of the pros and cons listed:
You can move from a floating to a fixed interest rate or consolidate multiple loans into one for easier management
Since you have already repaid part of your loan, refinancing a lower balance reduces your monthly payments
You can extend your loan term for lower EMIs or shorten it to clear your debt faster
Refinancing helps you secure a lower interest rate, reducing your overall repayment amount
Lenders assess your income and credit history before approving refinancing. A drop in income or a low credit score may lead to rejection
Closing your original loan and setting up a new one involves charges like processing fees, credit report fees, and more. Always calculate these costs before deciding.
Here are some things you can consider when refinancing your personal loan:
Consider foreclosure fees, processing fees, and other costs. Refinance only if savings outweigh expenses
A score below 600 may lead to rejection or higher interest rates, defeating the purpose of refinancing
It is beneficial in the early repayment years. For a 5-year loan, refinancing makes sense if done within the first 3 years
Be prepared with identity proof, bank statements, and income documents for a smooth process
Review all terms before signing. Seek clarification from the lender if needed
There is no set limit to how often you can refinance a personal loan, as long as each refinance is financially justifiable and improves your loan terms
Yes, you can refinance your personal loan from another bank if your current lender does not offer refinancing options.
Yes, a bank can reject your application for a personal loan refinance if they believe you may not repay on time or if your credit score is low
Yes, personal loans can be refinanced by taking out a new loan to pay off the existing one.
Refinancing is beneficial if it results in lower interest rates or more favorable terms without extending the repayment period unnecessarily.
It depends on whether you have secured better terms; generally, consider refinancing after improving credit scores or finding lower interest rates.
Your credit score might temporarily decrease due to inquiries during the application process but should improve over time with timely payments.