Refinance a personal loan when it pays

Refinancing replaces an existing personal loan with a new one — ideally at a lower rate. The headline rate cut is not enough on its own: fees, a longer term, and any early repayment charge on the old loan can erase the benefit.

Break-even months

If the new monthly payment is lower, a simple fee break-even is: fees ÷ monthly saving. If you will keep the loan longer than that, the refinance may pay on cashflow. Still checklifetime interest: stretching the term can raise total cost even when the monthly figure falls.

Practical checklist

• Include arrangement fees and any early repayment charge in “fees”
• Compare remaining interest on the current loan with interest + fees on the new one
• Watch credit checks and eligibility — calculators do not approve credit