A personal loan is very useful when you face a dire need for funds. However, as these are unsecured loans, the interest rates that lenders charge on a personal loan are comparatively higher. 

Apart from the interest charges, lenders also charge a personal loan processing fee on your loan. All these charges may make your loan expensive. To deal with this, you can refinance your loan. 

Refinancing a personal loan means taking a fresh personal loan from a lender charging a lower interest rate to pay back your existing loan that has a higher rate of interest. 

Taking a fresh loan at a minimum interest rate can go a long way in reducing the cost of the loan for the borrower. 

How to Refinance a Personal Loan

You can refinance your loan by taking the following steps:

1. Determine the amount of cash you require to pay back your existing loan. This amount would include the remaining principal loan amount, interest charges, loan foreclosure charges, etc. 
2. Have a look at your credit score before opting for refinancing your personal loan. 
3. Explore personal loan offers from different lenders to choose the lender with reasonable interest rates and flexible repayment terms. 
4. Apply for a personal loan with the lender of your preference and submit the required documents. 

Once your new loan is disbursed and you receive the cash in your account, you can use the money to pay back your existing loan. You can decide between fixed and variable interest rates when you refinance your personal loan to reduce the applicable interest charges. 

Also Read: Personal Loan EMI calculator: Know How it helps optimise your loan