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How to refinance your personal loan

Refinancing your personal loan can help to consolidate your debt or save you money on your loan.

Harmoney Unsecured Personal Loan

Harmoney Unsecured Personal Loan logo

From 6.99% p.a.

Unsecured loans

  • Borrow up to $70,000
  • Min. loan amount: $2,000
  • Loan term: 3 or 5 years
  • Establishment fee of $150
  • No early repayment fees
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Whether you are overwhelmed by debt spread across different accounts or you have found a deal that will save you money, refinancing a personal loan can reduce the amount you’re paying or help you manage your debt better.

If you are considering refinancing, it’s important to understand everything involved.

How does personal loan refinancing work?

Refinancing a personal loan works in much the same way as refinancing a home loan. You apply for a loan which covers the amount you have left to pay on your current loan/s and then use the new loan to pay off the original one. Some lenders can even organise the funds to be paid to your existing loan account, saving you the hassle.

You still have the same amount of debt, but you may save money by consolidating your debt or if the new loan offers better terms, lower fees or a reduced interest rate.

Ready to refinance? Here’s a selection of loans

Name Product Interest Rate (p.a.) Min. Loan Amount Max. Loan Amount Loan Term Monthly Service Fee Establishment Fee
Harmoney Unsecured Personal Loan
6.99% - 19.99%
3 or 5 years
Eligibility: Be a NZ resident/citizen and have a good credit score.
Apply for an unsecured personal loan up to $70,000 with no early repayment fees.
FROM 6.99%
The Co-operative Bank Unsecured Personal Loan
6.99% - 19.99%
6 months to 5 years
Eligibility: Be 18+, an NZ citizen/permanent resident, or have a valid work visa.
Floating-rate, unsecured personal loans from $3,000.
Lending Crowd Personal Loan
5.03% -19.30%
2, 3 or 5 years
$200 - $500 depending on the amount borrowed
Eligibility: Be a NZ resident/citizen and have a good credit score.
Secured and unsecured personal loans from $2,000 to $200,000. 100% online with no paperwork or early repayment fees.
Nectar Unsecured Personal Loan
8.95% - 29.95%
6 months to 4 years
Eligibility: Must be 18+, an NZ citizen or permanent resident, have an income of $400 per week or more (after tax) and a stable credit history.
Unsecured loans from $1,000 with payouts made within one day of approval. Applications entirely online.
Save My Bacon Unsecured Flex Loan
12 to 36 months
Eligibility: Be 18 or over, have an income of at least $400 per week and be a NZ citizen, permanent resident or have a valid work visa.
Medium-term unsecured loans from $2,000 to $5,000 with no hidden fees.
The Lending People Personal Loan
6.95% - 26.95%
1 to 7 years
$0 - $10 depending on lender
$50 to $695 depending on lender
Eligibility: Be 18+, an NZ citizen or permanent resident, in employment and earning at least $500 per week.
Secured and unsecured loans of up to $75,000 from a variety of reputable lenders.
Gem Secured Personal Loan
6.99% -18.99%
6 months to 7 years
Eligibility: Be 18+, a permanent NZ resident and earning a stable income.
Secured personal loans with weekly, fortnightly or monthly repayment schedules and no fees for early repayment.
Kiwibank Unsecured Personal Loan
13.95% - 18.95%
6 months to 7 years
Eligibility: Be 18+, an NZ citizen/permanent resident, and have a stable income. Ts&Cs apply.
Unsecured personal loans from $2,000

Compare up to 4 providers

Why should I refinance my personal loan?

There are a few reasons people choose to refinance their personal loans, but it boils down to either finding a better deal or consolidating debt.

You’ve found a better deal

  • If you think you have found a better deal, it might be worth using a personal loan repayment calculator, such as the one below, to compare the two loan options and see if the move is worth it. When comparing loans don’t just focus on interest rates, but look at ongoing fees and repayments as well as loan establishment costs. You should also consider the loan’s features to make sure they suit your needs. For example, if you currently make additional repayments you should confirm whether this is allowed for the new loan.

You’re consolidating debt

  • If you are refinancing a personal loan to consolidate debt, then you need to do a few more calculations. First, calculate the total monthly repayments for each existing loan. This includes fees, rates and any other charges you incur with the loan. Then compare this figure to what you can expect to pay for the new consolidated loan. Using a personal loan repayment calculator, as mentioned above, can simplify this process.

How do I refinance my personal loan?

  1. Compare your personal loan options. Take a look at what personal loans are available to see if you can find a better deal.
  2. Calculate the costs of refinancing. Include break and exit fees, and the establishment fees for your new loan to ensure it is worth your while.
  3. Apply for the new personal loan. If you meet the criteria for the new personal loan, submit your application. You may have to inform the lender that your loan purpose is to refinance or consolidate.
  4. Pay out your current loan with the funds from the new loan. If the loan is for debt consolidation your lender may be able to arrange this for you, but with other lenders, you will need to transfer the funds from your new loan into your current personal loan account.
  5. Make sure you close the old loan. Confirm with your previous lender that your loan account is closed, and you have no balance owing.

What are the costs of refinancing a personal loan?

The two costs you may encounter when changing or refinancing your personal loan are fees from your old provider and fees from the new provider.
Your current lender may charge:

  • Early repayment fees. You must completely pay off a loan before you can switch away from it, which is often done with money from the new loan. If you pay the total balance early, you may incur early repayment fees, which are usually a percentage of the total amount. Early repayment fees tend to be charged on fixed-rate loans rather than variable rate loans.
  • Administration fees. If you want to adjust your personal loan in any way, including changing it, you may incur an administration fee. This is usually a flat fee of around $10 to $30 (but can be more in some cases).
  • Break, cancellation or exit fees. Many lenders reserve the right to charge additional fees if you cancel, exit or otherwise break the loan agreement before expected. These may take the form of one or more flat fee.

Your new provider may charge fees for:

  • Opening an account or taking out a new loan. You will have to pay the usual costs associated with taking out a new personal loan, such as loan establishment fees.
  • Administration costs. If you’re refinancing a loan then your new provider may liaise with your old one on your behalf. This, as well as other account management or additional work, usually comes at a cost.
  • Account management fees. Sometimes your lender will charge ongoing account management fees on a monthly basis. These need to be taken into consideration.

Can I refinance with the same lender?

Often, lenders do not refinance loans that they originally gave out. However, if you know that your lender is offering a better deal to new customers or that you can qualify for a lower rate with your lender’s competitor, you may be able to negotiate a more favourable rate.

Essentially, your current lender probably doesn’t want to lose your future interest payments by you paying out of the loan early. Therefore, it’s a good idea to see what it may be able to offer. However, it’s important that you do your research first to ensure you have a good negotiating standpoint in regard to better deals, before contacting your lender.

Factors to consider when switching personal loans

  • Switching your loan for a different product from the same provider often means you can only change “like for like”, such as going from one low doc loan to another, or from one secured personal loan to another. Changing companies entirely may give you more choice and access to competitive rates.
  • If your circumstances have recently changed or are set to change shortly, you need to keep in mind whether you’re eligible for a new personal loan.
  • When switching or refinancing loans, to take advantage of special offers and temporary deals, consider how these policies apply in the long run once the promotional period has ended.
  • For the ease of refinancing in the future, you may wish to consider a loan with lower cancellation or early repayment fees.

How to compare your refinancing options

Refinancing is taking out a new loan, with a preferable interest rate and conditions, and using it to pay off and close down your current loan fully. When comparing your refinancing options keep the following in mind:

  • Do you want to combine credit card debt, store debt and other types of debt as well? Make sure your new lender will allow you to consolidate the different types of debt you have.
  • Your repayments are listed on your credit file and are usually taken into account when switching personal loans. If you’re already having trouble managing one loan, a lender will not approve you for another.
  • Find a new loan that works with your long-term goals. This is not necessarily the one that’s cheapest or the one that has the lowest minimum repayments. You may wish to select a loan that is quicker to repay, has flexible terms or a fixed interest rate.

Picture: Shutterstock

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