Is it good to refinance a personal loan?

Yes, you can pay off a personal loan early without a penalty – in most cases, at least. Penalties for repaying a personal loan ahead of schedule are very rare among major lenders. In fact, none of the personal loan providers that WalletHub has reviewed charges a prepayment fee. The purpose of such a fee, when it’s actually used, is to help the lender recoup some of the money it would have earned had the borrower paid interest for the full term.... read full answer

Personal loans generally require payment in equal monthly installments over a set period of time. But paying a personal loan off early can reduce the total cost of the loan by giving it less time to accrue interest. In addition, paying off a personal loan early reduces your overall debt load, which can improve your credit score. Another benefit is that you won’t have to worry about monthly payments anymore or have the stress of a loan hanging over your head for longer than necessary.

So paying off a personal loan early is good, provided you don’t get charged a fee. And it’s always wise to confirm that before submitting payment ahead of schedule. But even when there’s no fee, make sure that you can actually afford to pay off the loan early.

For example, if you have extra cash you could use to pay off the loan but do not yet have an emergency fund for unexpected expenses, it’s better to use the money to establish an emergency fund. And there may be additional situations where there’s something more urgent to use the money for than early loan payoff.

Yes, you can refinance a LendingClub personal loan using either a new personal loan or a balance transfer credit card from a different lender. By paying off your remaining LendingClub balance with a new, lower-interest loan or credit card, you will shift what you owe to the new lender and save money on finance charges. ... read full answer

How to Refinance a Loan from LendingClub With a New Loan

1. Check your credit score. Checking your credit helps you see if you’re able to get approved with the score you have or if you need to spend some time improving it. You can check your credit score for free on WalletHub.
2. Get pre-qualified (if possible). Pre-qualifying shows you which lenders may approve you and what rates may be available to you. You can pre-qualify with multiple lenders for free on WalletHub.
3. Apply for the new loan. You can apply for the loan online, in person or over the phone. You’ll need to give the lender some personal information when you apply, like your name, address and date of birth. The lender will also need some financial information, like your employment status and income.
4. Wait for funds. You should get your loan within a few business days of being approved. The lender will either write you a paper check or do a bank transfer.
5. Pay off the old loan. Once you receive the money, you’ll need to pay off the old loan.
6. Repay the new loan. After the old loan is paid off, you’ll then need to repay the new loan. This could take a few months or years to do.

Refinancing a Loan from LendingClub With a Balance Transfer

The biggest difference between using a balance transfer credit card and a personal loan for refinancing is that many cards offer 0% introductory APRs. If you can pay off your loan before the introductory period ends, you won’t have to pay interest.

To learn more, check out WalletHub’s balance transfer guide.

Final Thoughts

You should refinance a personal loan from LendingClub if it saves you money. Ideally, your new loan or credit card should have a lower APR than your old loan. You can qualify for a lower APR if your credit score and overall financial situation are better than when you got the first loan.

Finally, it’s worth noting that LendingClub does not offer personal loan refinancing services for its own loans. In other words, you can’t use a LendingClub loan to pay off another LendingClub loan and get a lower interest rate in the process.

The best way to lower the interest rate on a personal loan is by refinancing the loan with another lender. When you refinance, you use a new loan or line of credit with a lower interest rate to pay off the old loan, so you owe the old balance to the new lender. And since interest won’t be accumulating as quickly, you should be able to pay off the new loan sooner, assuming your monthly payment stays the same or increases.... read full answer

But some borrowers may also find success simply asking for a lower rate. Asking for a rate reduction is the easiest route, as it doesn’t require applying for a new financial product. It’s just less reliable. Still, it’s a good idea to pursue both paths at once – pre-qualify for some refinancing options and then mention their rates when negotiating. If the original lender won’t offer a cheaper rate, then refinance.

How to Get a Lower Interest Rate on a Personal Loan:

• Ask for a lower rate. If you call your lender and express concern that your APR is too high, there’s a chance the lender will reduce the rate. That’s especially true if you make it clear that you are experiencing temporary financial distress, that your creditworthiness has improved significantly since you applied, or that you are willing to take your business elsewhere. In any case, it doesn’t hurt to ask.
• Tap into your home equity. You can refinance an existing personal loan with a home equity loan or home equity line of credit, which are secured by your house but tend to have very low interest rates (4% - 8%).
• Take out another personal loan. If you get a lower interest rate on a new personal loan, you can use it to pay off the old one and save money in the long run.
• Move the debt to a balance transfer credit card. Balance transfer cards offer 0% introductory APRs for a certain number of months, and are best if you’ll be able to pay off the remaining balance completely in that time period. You’ll need good or excellent credit to qualify.

Tips for Negotiating a Lower Interest Rate on a Personal Loan

You can pre-qualify for a personal loan or for a balance transfer credit card (but not for home equity products). So if you pre-qualify for a loan with lower rates or a 0% balance transfer card, you can use that to your advantage when negotiating with your lender. If they know you’re thinking of moving your balance elsewhere, they may work with you. If not, you’ve got a good deal to fall back on.

It also helps to have another good reason for why the lender should lower your rate. One example is if your credit score has gone up a lot since you first opened the loan, meaning you’re a less risky borrower now. Another is if you’re having financial hardship (e.g. unemployment, sickness or damage to your home from a natural disaster) and simply can’t afford your payments. Lenders may be sympathetic to these problems and offer you at least a temporarily lower interest rate.

The keys to negotiating with your lender are to be clear about what you want to accomplish, truthful about your situation, and polite to the representative. Ask for copy of any new terms you agree to in writing. And if you’re unable to get a good deal, refinance instead.