A personal loan is a crucial financial tool in need. Its beneficial features include the opportunity to refinance a loan. But can you refinance a personal loan with the same bank? Typically, lenders allow you to do so. However, some banks may not permit it. If you can handle it nicely, you will be a gainer. Let’s discuss this in detail.
What is Refinancing a Personal Loan
Refinancing a personal loan is settling a loan by replacing it with a new one with more favorable terms. So you can reduce interest rates or more manageable monthly payments. This option eases your financial struggle in extreme situations. Moreover, learn what happens if you fail to repay a personal loan.
Also, an excessive interest rate requires a refinancing option. Another lender may offer a more attractive rate. Refinancing saves costs through decreased interest rates, reduced fees, and improved loan conditions. Additionally, it will shorten your loan duration, leading to long-term interest savings. Refinancing can shift the loan’s responsibility to the new lender.
When to Refinance the Personal Loan
Consider the below-listed factors while thinking about refinancing your personal loan.
- If you pay high interest and another lender offers a lower one, consider refinancing. So you can have smaller monthly payments.
- With your rising income, you can pay off loans faster by refinancing and choosing a shorter loan term. This saves you money in the long run.
- Lenders might offer you a loan with lower interest and fees if your credit score improves. Consider refinancing to get a better deal.
- Sometimes, you should make your monthly payments smaller. Refinancing helps by extending the loan term, giving you more breathing space in your budget.
- If you need to add or remove someone from your loan, refinancing can provide a way. When you refinance, you will set up new loan terms.
Perks and Drawbacks of Personal Loan Refinancing
The following table shows the pros and cons of refinancing a personal loan.
| Pros | Cons |
| Improved credit score will make you eligible for a lower interest rate, prompting long-term savings if you maintain the same loan repayment period. | Remember, the new loan might come with an origination fee, typically ranging from 1% to 8% of the loan amount. |
| You can choose a new loan with a longer repayment duration, making your monthly payments more affordable. | While extending your loan term can make your monthly payments more manageable, it might increase overall interest rates. |
| Depending on your creditworthiness, you may qualify for a loan with a higher maximum amount, potentially up to $100,000. | Applying for a new loan involves an inquiry on your credit report. These inquiries could temporarily reduce your credit score by a few points, typically five or less. |
| Variable interest rates rely on market fluctuations. You can eliminate this uncertainty by shifting to a personal loan with a fixed interest rate. So, your interest rate remains constant throughout the loan’s duration. |
What Our Investment Experts Say: Can You Refinance a Personal Loan with the Same Bank
A personal loan from the same bank: Some lenders allow refinancing your personal loan by sanctioning another loan to you. However, some others may not allow that. But it requires careful consideration for future benefits. Say your existing bank agrees to refinance your personal loan.
Problem with a personal loan from the same bank: They may offer a higher interest rate and some strict terms like lowering the duration of the loan term. You must avoid taking the refinancing offering from the existing bank. It will temporarily lessen your financial burden but will increase your burden more.
A second lender: Now, consider a different scenario. You are facing difficulties in paying your existing personal loan monthly. Your bank now agrees to refinance that with the above unfavorable conditions. If you seek a second option, you will find several other lenders agreeing to refinance your existing personal loan at a lower rate. Some banks or financial institutions may increase your loan’s payoff period.
Expert recommendation: So, we suggest you think strategically. Even if your existing bank wants to refinance your loan, check all the terms first. Check whether those are favorable or not. If not, look for another financial institution to get a better deal. Plus, you need the timeline for a personal loan to show up on your credit report.
The secret fees: However, when you refinance the loan from a different bank, your current bank may charge some fees. We think it is still ok. In the long run, the fees are insignificant compared to what you would have paid for the increased interest rate across the loan duration.
Final Words
So, can you refinance a personal loan with the same bank? We hope now you have a clear answer to the question. Some banks agree, and some do not. But this does not matter at all. Even if your current bank agrees to refinance the loan, you must check whether it is beneficial for you or not. If not, choose another bank at a lower interest rate and a longer loan period.