Can you Refinance a Personal Loan ?

Last Updated : July 13, 2021, 12:42 p.m.

Have you ever heard of the term refinance in the loan space ? No, na! Many have the belief that refinance term is synonymous with credit cards or car loans. But you would be surprised to know that it applies in the case of a personal loan as well. As personal loan has a vast coverage area catering to literally every single requirement from getting funds for marriage to meeting the emergency needs. So, one can say that it is everyone’s product, isn’t it folks?

First, let us understand what refinance means and then we would narrate how personal loan refinance could work in your favour. Refinance is actually a process wherein you can take a new loan to clear and consolidate your existing debts. Let me align with the title of the article by saying, you can easily refinance personal loan and reap benefits from the same. So, get ready to explore the benefits of personal loan refinance as we chart out the details below.

Low Interest Rates, Improved Credit Score-Hallmark of Personal Loan Refinance

1. Low Interest Rates Await- Say goodbye to higher interest rates on your loan by opting for a personal loan refinance option. To get the most out of the said facility, screen through the personal loan interest rates of several banks. You can even get your eyes into non-banking finance companies (NBFCs) to check the same. Go all out and get your loan sanctioned from a lender offering you an amount to pay off your existing credit first, followed by easy servicing of the personal loan. So, all those loan honchos who have pocketed a loan but are struggling to pay off the same, use personal loan refinance to be at ease.

For exampl e- If you have a personal loan account at HDFC Bank where applicable interest rates range from 15.75%-20% p.a., you can jump in to the lower interest rate of 12%-16% offered by SBI via refinance option. You can clearly see the difference of 3%-4% among the two premier lenders. The saving of 3%-4% can let you free from being All at Sea, which can happen if you continue with the existing lender.

2. Pocket to Breath Easy – The lower interest rates are followed by the lower EMIs and a much-needed relief to your pocket which would be under the hammer of elevating installments if you don’t avail the refinance option. So with the personal loan refinance, you could still have the cash to feed upon after paying off the installments each month, much unlike the other way round with very limited amount available post the monthly repayment.

The savings you realize from this exercise can be efficiently utilized in your monthly expenses. So, why not use personal loan refinance and save something for a torrid time if and when it looms in front of you.

3. Credit Score to Go Skywards – On the monetary front, it is discussed that the refinance option will bring down the interest rates and the resultant EMIs. But the benefits, overdue from the refinance option, has now gone on to the betterment of the credit score , which actually is a make or break for the loan applicants.

Banks or NBFCs reject loan application even if the credit score goes below the acceptable level of 700 points by few notches only. So, when you know that refinance can lift your credit score from the ashes, then why not use it and get free from your existing inflating loan journey by taking a personal loan refinance. Just in case you are reeling under the negative effects of poor credit score, taking a new loan can induce a fresh life into your credit rating.

4. Option to Choose between Shorter & Longer Tenure – Personal loan refinance, like other loan options, come with both shorter and longer tenure options. With a longer tenure, the EMIs will go down and vice-versa. If you want to reduce the outflow of interest over a period of time, you can then opt for a shorter tenure. It does come with an expense of higher EMI. If you can bear it well without letting your pocket go awry, you belong to personal loan refinance in every sense of the word.

5. Debt Management – With a new loan, your existing debts including that of credit card debts, which come with a higher interest rate, are paid off completely.

Above, there are a flurry of benefits related to personal loan refinance, which you must have gone through. So, if your existing lender is creating chaos in your financial life by levying a higher interest rate on your loan, use the personal loan refinance facility with lower interest rate.