Quick answer
Refinancing a personal loan means replacing it with a new loan, either to lower the cost, change the term, release funds or combine other debts. It is worthwhile only if the total cost, fees and term genuinely improve. Ownright Custom Finance can look at refinance options Australia-wide, including secured loans and cases where the current lender has become difficult.
Key points
- Refinancing swaps one loan for another, so the whole cost must be compared
- Exit fees and break costs on the old loan can cancel out a saving
- A longer term lowers repayments but can cost more overall
- People in arrears or on a tighter budget may need a different kind of lender
- Suits
- Borrowers with an existing personal loan wanting a better structure
- Security
- Unsecured, or secured by a vehicle, property or other asset
- Ownright's role
- We look at refinance and consolidation options
- Australia-wide
- Yes
What does it mean to refinance a personal loan?
Refinancing a personal loan means replacing it with a new one. The new lender pays out your existing balance and you start repaying them instead. Sometimes it is the same lender offering a new contract. MoneySmart defines refinancing as replacing or extending an existing loan, with the same or a different lender.
People do it for several reasons: to cut the cost, to change the repayment, to lengthen or shorten the term, to bundle other debts together or to raise a little extra cash.
When is refinancing a personal loan worth it?
A refinance tends to be worthwhile when:
- The total cost over the remaining life of the loan actually falls
- The new term is no longer than the old one, unless you accept paying more for lower repayments
- Fees on both sides, including exit costs on the old loan, are small compared with the saving
- You can afford the new repayment, including if costs rise or income falls
It tends not to be worthwhile when the saving is marginal, when you are far into the term, or when the new loan is simply longer. Late in a loan most of your repayments are already principal, so the room to save is small.
What can go wrong?
- Longer terms cost more. MoneySmart’s example shows the same borrowing costing more as the term grows.
- Fees add up. Look at exit, establishment and ongoing fees together.
- More credit, more risk. Releasing extra funds raises your debt.
- Security. Moving to a secured loan puts an asset behind the debt.
- Credit file. Each application leaves an enquiry, so shop sensibly rather than applying everywhere.
Unsecured, secured or property-backed refinance
| Type | Security | Typical suitability | Consideration |
|---|---|---|---|
| Unsecured personal loan | None | Good credit, steady income | Harder with arrears |
| Secured personal loan | Vehicle or asset | Mid-sized balances | Asset can be repossessed |
| Home loan top-up or refinance | Your home | Larger debts, equity available | Long term can raise cost |
| Second or private mortgage | Property | Declined elsewhere, complex files | Priced on circumstances |
Our guide on secured versus unsecured personal loans explains the difference in more detail, and personal loan versus second mortgage helps when property is involved.
What do lenders look at when refinancing?
- The payout figure and remaining term of your current loan
- Your repayment history on that loan
- Income, expenses and dependants
- Other debts and credit limits
- Security, where relevant
- The purpose of any extra funds
How does Ownright help?
Many people think refinancing is a case of ticking a box on a comparison site. It often is, until it isn’t: a missed repayment, a self-employed income, a thin credit file or a lender that will not budge can all complicate it. That is where Ownright Custom Finance does its best work.
Trevor Scott and the team look at the whole situation and find routes that a standard lender may not consider. That could mean a personal loan with a more suitable structure, bad credit personal loan options, a car loan refinance if a vehicle is part of the picture, or private lending against property. We work in every state and territory from our Knoxfield, Victoria head office. Send us your current loan details and we will see what is possible, noting that speed depends on the lender, the security and how quickly documents arrive.
An illustration
Illustrative scenario only. A borrower has a personal loan with a mid-term balance and a couple of overdue accounts. A comparison site shows cheaper loans, but none will assess the arrears. A broker might look at lenders that treat arrears as a short chapter rather than the whole story, compare total cost with staying put, and say plainly if staying is the better choice.
Mistakes to avoid
- Chasing a lower repayment without checking the total cost
- Forgetting exit fees on the old loan
- Borrowing extra without a clear purpose
- Applying to several lenders in a short span
- Letting arrears build before seeking help
Documents to have ready
- Photo ID
- Latest statement showing the payout figure
- Recent payslips or tax returns
- Bank statements
- A list of other debts and assets
Our guide to getting loan ready walks through a practical checklist.
How do you know if the new loan is really cheaper?
Start with your current loan statement: the payout figure, remaining term, repayment and any early exit fee. Then get the full cost of the new loan: establishment fees, ongoing fees, the term and the repayment. Add up what you will pay from now to the end on each path. If the new total is lower and the term is not longer, there is a case. If the total is higher and you are doing it only for a lower repayment, be sure you are comfortable with that trade-off. MoneySmart recommends asking about fees, the term, whether the rate is fixed or variable and whether extra repayments are penalty-free.
Can you refinance a car loan or other loan at the same time?
Often yes. Many borrowers combine a personal loan with a car loan, store card or credit card debt into one new loan. Whether that works depends on the lender and on whether any of the debts carry security. If a vehicle is part of the equation, our page on car loan refinance covers the particulars, and debt consolidation personal loans explains the broader approach.
What if you are self-employed or have irregular income?
Lenders assess irregular income more carefully. Expect to provide tax returns, notices of assessment, BAS or business bank statements. Some lenders accept alternative documents, which can matter if your paperwork is not standard. Our guide on proving income without payslips explains what can work, and we can tell you which lenders are comfortable with your profile.
Should you ask your current lender first?
It is worth a call. Your existing lender may offer a new contract or help if you are struggling, and a hardship request does not cost anything. If you are on a hardship arrangement already, a new lender will want to understand why. Being upfront speeds things up. If the existing lender will not help, or the arrangement does not fit, that is when looking elsewhere, with a broker, makes sense.
Looking for a better loan than the one you have
Sounds like you are looking to refinance a personal loan into something that fits better. We’re the lending experts at finding refinance options other lenders overlook, so click the button below and see if you qualify.
How it works, step by step
- 1
Step 1
Send us your current loan statement and tell us what you want to change.
- 2
Step 2
We compare the payout figure, remaining term and likely costs of switching.
- 3
Step 3
We approach lenders suited to your income, credit file and any security.
- 4
Step 4
The old loan is paid out and you move across to the new arrangement.
Frequently asked questions
What does refinancing a personal loan mean?
It means taking out a new loan to pay off an existing one, possibly combined with other debts. People do it to change the repayment, extend or shorten the term, or release a little extra. It only helps if the new loan, including all fees, leaves you better off overall.
Can refinancing a personal loan cost me more?
Yes. MoneySmart notes that spreading a debt over a longer term can lower repayments but raise total cost, and that a higher rate or fees can make consolidation dearer. Exit fees on the old loan are another cost. Always compare total cost over the full term, not just the monthly figure.
Can I refinance a personal loan with bad credit?
Sometimes, though options narrow. Some lenders will consider the circumstances behind a default or arrears, and security can broaden the field. Expect a closer look at your income and conduct. We ask what happened, then look at lenders whose appetite fits your profile.
Can I borrow extra when I refinance?
Often a lender will consider releasing some extra funds, subject to serviceability and your credit file. Be cautious: borrowing more while refinancing can leave you owing more for longer. We discuss whether an extra amount genuinely solves a problem or just postpones it.
How long does a personal loan refinance take?
It varies. Speed depends on the lender, the security and how quickly your documents arrive. Having statements, payslips and ID ready helps most. We do not promise set timeframes, but we will tell you what is realistic for the lender we approach.
What if my personal loan lender won't help me?
If you are struggling to repay, contact your lender about hardship options first, and consider a free financial counsellor through the National Debt Helpline on 1800 007 007. If a refinance is still the right step, we can look at lenders who assess hardship-affected files.