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Refinancing a personal loan in Australia
If your personal loan is no longer working for you, refinancing it is an option. But that sounds a bit complicated, right?
In my experience, the finance industry has a habit of making things sound much more complicated than they are.
Refinancing a personal loan just means switching it to another lender. Or changing your current loan.
This guide explains how a personal loan refinance works and the possible traps to watch out for.
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Can you refinance a personal loan?
Personal loan refinancing is possible on most loans. I’ve seen borrowers do it to get a better rate, borrow a bit extra, or extend their loan term.
If you’re refinancing to save money, whether it’s actually worthwhile is a different question.
You’ll need to make sure it'll pay off based on the switching costs. But a lot of the time it is. And if the numbers check out, personal loans refinancing can actually be fairly simple to do.
How does refinancing a personal loan actually work?
The process of refinancing your loan goes like this:
- You find a new personal loan that offers you an improved deal and works better for you
- You make an application with the new lender
- If you’re approved, your new lender either releases the money for you to repay your existing loan, or repays your existing lender directly
- You start making repayments on your new loan
Essentially, you get a new loan to repay the old loan. Then you repay the new one.
Ideally on better terms so you’re saving money.
If you’re looking to increase your loan amount or extend the term of your loan, you would just apply to do that with your current lender.
They will assess whether you can still afford the loan based on the changes before approving them.
Top 7 reasons to refinance a personal loan
Refinancing is usually associated with a home loan. But personal loan refinancing can make a lot of sense too, for similar reasons.
I’ve found these are some of the most common ones.
1. Refinancing to get a lower rate
A lot of people refinance their personal loan simply to switch to a lower interest rate. If you still have a few years left on your personal loan, getting a lower interest rate could save you thousands of dollars in interest.
2. Refinance to save on fees
Some personal loans come with a monthly fee. And truth be told, you often don’t get a lot in return. Refinancing your personal loan to one without fees could mean a big saving.
3. Your credit score has improved
Let’s say you needed to take out a bad credit personal loan initially. But you’ve been making your repayments consistently for more than a year and your score is looking healthier now. You may now be eligible to apply with lenders that were previously off limits.
4. Refinancing to borrow more
If you want to borrow more money, you could apply to increase your loan amount. This may be more straightforward than applying for another loan.
5. Refinancing to a longer loan term
Personal loan statistics compiled by Money.com.au show the average new personal loan is just under three years. If reducing your regular repayment amount is a priority, a personal loan refinance to extend the term could be an option. Just bear in mind that doing that this could increase your total interest cost.
6. Refinancing to consolidate debt
Debt consolidation is a specific type of refinancing. It means you can combine other debts you have into a new loan, as well as your personal loan. You could consolidate credit cards, store cards, and buy now, pay later balances.
7. Better loan features
If your current personal isn’t flexible, you could refinance it to one that is.A big factor here is the ability to make extra repayments without penalty. Being able to do this can reduce your interest costs and mean you’ll be debt-free sooner.
Best refinance personal loan interest rate comparison
Compare a selection of personal loan interest rates in Australia, with ranges based on the borrower's credit score and other factors. As you can see, the difference between a lender’s lowest and highest rate can be massive. This is why it's important to get personalised quotes from multiple lenders. The table is sorted by lowest comparison rate.
Harmoney | |
|---|---|
| Personal loan interest rate | 5.76% p.a. to 24.03% p.a. |
| Comparison rate* | 6.55% p.a. to 24.98% p.a. |
Plenti | |
| Personal loan interest rate | 6.57% p.a. to 24.09% p.a. |
| Comparison rate* | 6.57% p.a. to 26.28% p.a. |
NOW Finance | |
| Personal loan interest rate | 6.75% p.a. to 26.95% p.a. |
| Comparison rate* | 6.75% p.a. to 26.95% p.a. |
Pepper Money | |
| Personal loan interest rate | 6.75% p.a. to 26.95% p.a. |
| Comparison rate* | 6.75% p.a. to 26.95% p.a. |
ING | |
| Personal loan interest rate | 6.89% p.a. to 18.99% p.a. |
| Comparison rate* | 7.10% p.a. to 19.23% p.a. |
Our Money Market | |
| Personal loan interest rate | 6.57% p.a. to 18.99% p.a. |
| Comparison rate* | 7.19% p.a. to 21.78% p.a. |
Moneyplace | |
| Personal loan interest rate | 7.24% p.a. to 19.99% p.a. |
| Comparison rate* | 7.24% p.a. to 21.49% p.a. |
Liberty Financial | |
| Personal loan interest rate | 7.24% p.a. to 19.99% p.a. |
| Comparison rate* | 7.24% p.a. to 21.49% p.a. |
Bank of Melbourne | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
BankSA | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
St.George Bank | |
| Personal loan interest rate | 6.89% p.a. to 19.99% p.a. |
| Comparison rate* | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
Great Southern Bank | |
| Personal loan interest rate | 7.49% p.a. to 19.99% p.a. |
| Comparison rate* | 7.74 % p.a. to 20.27% p.a. |
NAB | |
| Personal loan interest rate | 6.99% p.a. to 20.49% p.a. |
| Comparison rate* | 7.91% p.a. to 21.33% p.a. |
ANZ | |
| Personal loan interest rate | 7.49% p.a. to 19.99% p.a. |
| Comparison rate* | 8.18% p.a. to 20.58% p.a. |
G&C Mutual Bank | |
| Personal loan interest rate | 7.99% p.a. to 16.99% p.a. |
| Comparison rate* | 8.20% p.a. to 17.22% p.a. |
Society One | |
| Personal loan interest rate | 8.20% p.a. to 24.89% p.a. |
| Comparison rate* | 8.27% p.a. to 25.64% p.a. |
Westpac | |
| Personal loan interest rate | 7.99% p.a. to 20.49% p.a. |
| Comparison rate* | 9.18% p.a. to 21.61% p.a. |
Wisr | |
| Personal loan interest rate | 9.04% p.a. to 23.79% p.a. |
| Comparison rate* | 9.88% p.a. to 24.56% p.a. |
Commbank | |
| Personal loan interest rate | 8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable) |
| Comparison rate* | 9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable) |
MoneyMe | |
| Personal loan interest rate | 9.20% p.a. to 25.20% p.a. |
| Comparison rate* | 10.58% p.a. to 26.58% p.a. |
Latitude Financial | |
| Personal loan interest rate | 9.49% p.a. to 29.99% p.a. |
| Comparison rate* | 10.93% p.a. to 31.83% p.a |
Fair Go Finance | |
| Personal loan interest rate | 21.90% p.a. to 25.90% |
| Comparison rate* | 27.54% p.a. to 33.80% p.a. |
Jacaranda Finance | |
| Personal loan interest rate | 17.95% p.a. to 24.95% p.a. |
| Comparison rate* | 32.40% p.a. to 39.63% p.a. |
| Personal loan interest rate | Comparison rate* | |
|---|---|---|
Harmoney | 5.76% p.a. to 24.03% p.a. | 6.55% p.a. to 24.98% p.a. |
Plenti | 6.57% p.a. to 24.09% p.a. | 6.57% p.a. to 26.28% p.a. |
NOW Finance | 6.75% p.a. to 26.95% p.a. | 6.75% p.a. to 26.95% p.a. |
Pepper Money | 6.75% p.a. to 26.95% p.a. | 6.75% p.a. to 26.95% p.a. |
ING | 6.89% p.a. to 18.99% p.a. | 7.10% p.a. to 19.23% p.a. |
Our Money Market | 6.57% p.a. to 18.99% p.a. | 7.19% p.a. to 21.78% p.a. |
Moneyplace | 7.24% p.a. to 19.99% p.a. | 7.24% p.a. to 21.49% p.a. |
Liberty Financial | 7.24% p.a. to 19.99% p.a. | 7.24% p.a. to 21.49% p.a. |
Bank of Melbourne | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
BankSA | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
St.George Bank | 6.89% p.a. to 19.99% p.a. | 7.59% p.a. to 20.59% p.a. (variable rate): 7.81% p.a. to 20.83% p.a. (fixed rate) |
Great Southern Bank | 7.49% p.a. to 19.99% p.a. | 7.74 % p.a. to 20.27% p.a. |
NAB | 6.99% p.a. to 20.49% p.a. | 7.91% p.a. to 21.33% p.a. |
ANZ | 7.49% p.a. to 19.99% p.a. | 8.18% p.a. to 20.58% p.a. |
G&C Mutual Bank | 7.99% p.a. to 16.99% p.a. | 8.20% p.a. to 17.22% p.a. |
Society One | 8.20% p.a. to 24.89% p.a. | 8.27% p.a. to 25.64% p.a. |
Westpac | 7.99% p.a. to 20.49% p.a. | 9.18% p.a. to 21.61% p.a. |
Wisr | 9.04% p.a. to 23.79% p.a. | 9.88% p.a. to 24.56% p.a. |
Commbank | 8.49% p.a. to 20.49% p.a. (fixed); 8.00% p.a. to 20.00% p.a. (variable) | 9.88% p.a. to 21.78% p.a. (fixed); 9.40% p.a. to 21.30% p.a. (variable) |
MoneyMe | 9.20% p.a. to 25.20% p.a. | 10.58% p.a. to 26.58% p.a. |
Latitude Financial | 9.49% p.a. to 29.99% p.a. | 10.93% p.a. to 31.83% p.a |
Fair Go Finance | 21.90% p.a. to 25.90% | 27.54% p.a. to 33.80% p.a. |
Jacaranda Finance | 17.95% p.a. to 24.95% p.a. | 32.40% p.a. to 39.63% p.a. |
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What to look out for when refinancing your loan
As we’ve seen, refinancing a personal loan can be a simple process.
The part that requires a bit of effort is comparing new offers to your existing loan.
And crucially, working out if the new loan will actually work out better once you factor in switching costs.
Here are the steps I’d suggest looking at:
- Calculate the cost of your current personal loan. Look at the regular repayment amount and the total amount to repay (including interest and fees).
- Compare this to what’s on offer from refinance personal loans (always compare apples with apples when comparing, so the same type of loan, over the same term and for the same loan amount.)
- Now, calculate your switching costs, including break (early repayment) costs your current lender will charge and any upfront fees for the new loan
- Add the switching costs to the total cost of the new personal loan you’re considering and see if you’re still ahead.
Personal loan refinancing costs to factor in
Working out your switching costs is really the crucial step. Here’s what to look for:
Existing loan fees
Your current lender may charge break/early repayment fees if you end the loan agreement early. These should be outlined in the loan documents issued to you by your lender.
Fees for finding the new loan
Of course, it’s possible to compare loans for free. But if you use a personal loan broker who charges a fee, make sure to factor this in.
New loan fees
The lender you’re switching to may charge an application fee.
And be sure to take a look at what break fees the new lender may charge.
Just in case you choose to refinance again down the track.
How to apply for a refinance personal loan
If you have used Money Matchmaker™ to compare refinance personal loan options, you can select the lender of your choice and apply directly.
You will need to supply the same kind of documentation as you would when applying for a new personal loan:
- Proof of identity — e.g. passport or driver licence
- Proof of income — e.g. payslips, bank statements
- Details of any current debts or other loans
The lender will also check your credit history. It can be helpful to check your own credit score before applying so you know where you stand.
Are there any reasons to avoid personal loan refinancing?
Refinancing a personal loan may not make sense for everyone.
It really comes down to the specifics of the current loan and potential new one, plus your circumstances.
Here are some reasons people might choose not to refinance. At least not right now.
- You won’t actually save money (e.g. the refinancing costs outweigh the savings)
- It’s too early in your loan term: applying for too many loans in a short period of time can impact your credit score.
- Your financial situation has changed: remember the new lender will assess your personal loan application carefully based on your current situation to ensure you can meet the repayments. For example, if you have just had a drop in income, getting approved to refinance may be more difficult.
- You’re struggling financially. It may be best to first get some help from a financial counsellor.
Personal loan refinancing FAQ
Get help from a real-life Money Matchmaker® from start to finish.
Can I refinance my personal loan with the same lender?
Yes this is usually possible. You could refinance the personal loan to a higher amount, a longer term or potentially to a different loan type (e.g. switching from a variable to a fixed interest rate).
Can I refinance a secured personal loan?
Yes, this is usually possible. The main thing to watch out for is whether the asset being used to secure the existing loan will be eligible to be used as security on the new loan. For example, if you’re refinancing a car loan, the current age of the vehicle could be a factor.
Refinancing an unsecured personal loan is usually more straightforward.
When is the best time to refinance a personal loan?
This depends on your circumstances. Here are some factors I'd suggest considering when deciding if now is the best time to refinance:
- Have I had the existing loan for a long enough period of time (12 months is a common rule of thumb)?
- Is there long enough remaining on the loan term to ensure the savings outweigh the refinance costs?
- Are my finances in a good position? Remember the new lender will do a full assessment before approving the loan
- Have my circumstances changed significantly since I was approved for the initial loan (e.g, employment changes, other debts)
- If you’re refinancing a personal loan to borrow more money, will you be able to afford the higher repayments?
Does refinancing a personal loan affect your credit score?
Applying for new finance could mean your credit score is impacted negatively in the short term (particularly if you have made multiple applications recently).
But if refinancing the personal loan makes your repayments more affordable so you can keep up with them consistently and even pay off the loan sooner, this could help to improve your credit score over time.
What are the pros and cons of refinancing a personal loan?
Here are the main pros and con to think about with personal loan refinancing:
Pros
- Can help you save money if you refinance to a lower rate and fees
- You may be able to borrow more money if you need it
- You can lower your regular repayments by extending your loan term
Cons
Refinancing costs can outweigh the savings if you’re not careful
There could be a short term impact on your credit score
Is it a good idea to refinance a loan?
Overall, this will come down to your situation. Hopefully this guide has helped you understand what you need to look for and how to calculate your savings and costs.
If you have worked these out, the answer to this question should be easier to land on.
Shopping around for the right loan can save you thousands of dollars in interest and fees.
Personal Loans guides and resources
The great thing about personal loans is they can fund almost anything. They are perfect when you need that bit extra to cover expenses, start a project or reset your finances to get back on track.
Written by
Loans Expert
Shaun McGowan
Reviewed by
Editor
Sean Callery
AS FEATURED IN
*Information about comparison rates Comparison rates are designed to allow borrowers to understand the true cost of a loan by taking into account fees and charges, the loan amount and the term of the loan. The comparison rate is based on an unsecured fixed rate personal loan of $10,000 over 3 years. WARNING: Comparison rates are true only for the examples provided and may not include all fees and charges. Different terms, fees or loan amounts might result in a different comparison rate.
