Should You Refinance a Personal Loan?
Yannie Woon 29 July 2026
Key Takeaways
- Refinancing a personal loan means using a new loan to repay an existing loan, usually to obtain a lower cost or more manageable repayment schedule.
- A lower interest rate or monthly instalment does not automatically make refinancing cheaper.
- Compare the remaining cost of your current loan with the new loan’s total repayment, early settlement charge, processing fee and other compulsory costs.
- Extending the repayment tenure may reduce your monthly instalment but increase the total interest paid.
- Refinancing requires a fresh application and credit assessment, so approval and better terms are not guaranteed.
- If you are struggling with repayments, speak to your existing provider before applying for more credit.
Refinancing can appear attractive when another provider offers a lower interest rate or smaller monthly instalment. However, replacing one loan with another does not always reduce the amount you ultimately pay.
When deciding whether to refinance a personal loan in Singapore, you need to compare the complete remaining cost of your current loan with every cost attached to the new facility. Early settlement charges, processing fees and a longer tenure can reduce or eliminate the expected savings.
This guide explains how personal loan refinancing works, when it may be worthwhile and what to calculate before submitting a new application.
Table of Contents
What Does Refinancing a Personal Loan Mean?
Refinancing generally means taking a new loan and using the funds to settle an existing personal loan. After the current facility is closed, you repay the new provider according to a different interest rate, monthly instalment and tenure.
Personal loan refinancing may not always be advertised as a separate product. In practice, a borrower may apply for a new personal loan in Singapore and use the approved funds to repay another provider.
The new provider does not necessarily settle your existing account automatically. You may need to obtain a full settlement figure, pay the original provider and confirm that the facility has been closed.
Refinancing is different from restructuring. Refinancing involves replacing the loan with new credit, whereas restructuring generally involves negotiating revised terms with the existing provider.
Why Do Borrowers Refinance Personal Loans?
Borrowers may consider refinancing for several reasons:
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- To obtain a lower effective interest rate
- To reduce the total remaining borrowing cost
- To lower the monthly instalment
- To change the repayment tenure
- To move repayments to another provider
- To combine selected debts into a more manageable arrangement
These objectives are not always achieved together. A longer tenure, for example, may lower the monthly payment while increasing the total interest cost. Decide whether your main priority is reducing the overall cost, easing monthly cash flow or clearing the debt sooner.
When Might Refinancing Be Worthwhile?
Refinancing may be worth considering when the new arrangement provides a meaningful financial benefit after every relevant cost has been included.
The New EIR Is Meaningfully Lower
A lower effective interest rate (EIR) may reduce your borrowing cost. EIR is generally more useful than the advertised rate because it reflects the way interest is calculated and certain applicable charges.
Use the EIR versus advertised interest rate guide to understand why two loans with similar advertised rates may have different actual costs.
You Still Have a Significant Balance or Tenure Remaining
Potential savings are usually more relevant when a substantial balance and several repayments remain. If your existing loan is close to completion, the savings may be too small to justify the fees and administrative work involved.
The Total Remaining Cost Will Decrease
The strongest reason to refinance is that the complete amount payable from today onwards will be lower under the new arrangement. This comparison should include both the old loan’s settlement costs and the new loan’s charges.
The New Repayment Is More Sustainable
Refinancing may improve cash flow if the new monthly instalment fits your budget more comfortably. However, check how much longer you will remain in debt and whether the extended tenure increases your total repayment.
When Might Refinancing Cost More?
A lower headline rate does not guarantee savings. Refinancing may be unsuitable when:
- Your existing provider imposes a substantial early settlement charge
- The new loan includes processing or administrative fees
- You must repay or forfeit rebates attached to the current loan
- The new tenure is considerably longer
- Only a small number of instalments remain on your current loan
- The new EIR is not significantly lower
- You refinance repeatedly without reducing the underlying debt
You should also be cautious if the main purpose is to create temporary room in your budget while continuing to borrow. Repeated refinancing can prolong indebtedness and increase the risk of accumulating additional commitments.
What Costs Should You Compare?
Ask your existing provider for an up-to-date settlement statement rather than relying only on the balance shown in an app or previous statement. The settlement amount may include charges not reflected in the principal balance.
Compare the following items:
| Current Loan | New Loan |
|---|---|
| Total of all remaining instalments | Total of all new instalments |
| Full settlement amount | Effective interest rate |
| Early repayment or cancellation fee | Processing or administrative fee |
| Required notice-period charges | Insurance or compulsory add-on costs |
| Rebates that must be returned | Early settlement terms for the new facility |
Use the following calculation as a starting point:
Estimated refinancing cost = total new loan repayments + current loan settlement charges + new compulsory fees
Compare this figure with the total amount you would pay by continuing with your existing repayment schedule.
Personal Loan Refinancing Example
Consider a borrower who has 24 monthly instalments of S$600 remaining on an existing loan.
| Option | Calculation | Estimated Cost |
|---|---|---|
| Continue current loan | 24 instalments × S$600 | S$14,400 |
| Refinance with new loan | 36 instalments × S$380 | S$13,680 |
| Existing loan settlement charge | One-time cost | S$300 |
| New loan processing fee | One-time cost | S$120 |
| Total refinancing cost | S$13,680 + S$300 + S$120 | S$14,100 |
In this simplified example, refinancing reduces the estimated total cost by S$300 and lowers the monthly instalment by S$220. However, the borrower remains in debt for 12 additional months.
This example is for illustration only. Actual savings depend on the settlement amount, interest calculation, fees and official repayment schedules provided by both lenders.
How to Refinance a Personal Loan in Singapore
- Request a settlement statement: Ask your current provider for the amount required to close the loan, including fees and any notice requirements.
- Check your remaining repayment cost: Add the instalments you would pay if you kept the existing loan until completion.
- Review your financial position: Check your income, expenses, existing debts and credit report before applying.
- Compare suitable offers: Review the EIR, fees, tenure, monthly instalment and total repayment for each option.
- Calculate the net saving: Include the existing settlement charge and every compulsory cost of the new loan.
- Apply carefully: Avoid submitting numerous applications within a short period simply to test your eligibility.
- Settle the original facility: Follow the provider’s instructions and retain proof of payment.
- Confirm account closure: Check that the existing loan has been fully settled and no further instalments will be deducted.
Do not stop paying your current loan while waiting for the refinancing application. Continue making repayments by their due dates until the original provider confirms that the account has been settled.
Will Refinancing Affect Your Credit Score?
Refinancing involves applying for new credit. The provider may review your credit report, income, existing facilities and repayment history before deciding whether to approve the application.
Your credit report may contain information about loan applications, credit facilities and repayment behaviour. Several applications within a short period can create additional credit-enquiry activity and may influence how providers assess your financial position.
Closing the original loan does not remove its payment history immediately. Maintaining timely repayments before and after refinancing remains important. Learn more about the factors providers may review in the guide to credit scores for personal loans.
Refinancing vs Debt Consolidation
Refinancing commonly replaces one existing loan with another. Debt consolidation combines multiple eligible debts into a single facility or repayment arrangement.
Debt consolidation may be more relevant when you have several personal loans, credit card balances or other unsecured facilities that have become difficult to track. However, eligibility requirements, excluded debts and provider terms apply.
Review the Money Kinetics Debt Consolidation Plan guide if you are managing several unsecured debts rather than refinancing only one personal loan.
Alternatives to Refinancing a Personal Loan
Before applying for a new loan, consider whether another approach would better address your situation:
- Make additional repayments: If permitted without a substantial fee, additional payments may help reduce the balance sooner.
- Settle the loan early with savings: Compare the settlement charge with the interest you could avoid, while retaining an adequate emergency fund.
- Ask for repayment assistance: Contact your existing provider promptly if you expect difficulty making an instalment.
- Adjust discretionary spending: A temporary budget change may make the current instalment more manageable without extending the debt.
- Consider debt consolidation: This may be relevant when several eligible unsecured debts need to be reorganised.
- Compare a balance transfer carefully: Promotional rates may involve processing fees and revert to higher rates if the balance is not cleared as planned.
The comparison of a personal loan versus a balance transfer explains how their repayment structures and costs differ.
You can also use the Money Kinetics personal loan calculator to estimate monthly instalments under different loan amounts, rates and tenures. Calculator results are estimates and should be checked against the provider’s official repayment schedule.
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Compare Personal Loan Options Carefully
If refinancing could reduce your borrowing cost or provide a more suitable repayment schedule, Money Kinetics can help you compare personal loan options from participating providers. The comparison service does not charge users.
Submit an enquiry through Money Kinetics. Approval and savings are not guaranteed. Compare the effective interest rate, settlement charges, fees, tenure, monthly instalments and total repayment before accepting an offer.
FAQs About Refinancing a Personal Loan
Can I refinance a personal loan in Singapore?
Yes. You may apply for a new personal loan and use the approved funds to settle an existing facility. The application is subject to the new provider’s eligibility requirements and credit assessment, so approval is not guaranteed.
Does refinancing a personal loan save money?
It may save money if the new loan’s total repayment, together with settlement charges and compulsory fees, is lower than the remaining cost of your current loan. A lower monthly instalment alone does not confirm that refinancing is cheaper.
Can I refinance a personal loan with the same bank?
Your existing bank may offer another facility or consider a request to revise your repayment arrangement, but available options depend on its policies and your circumstances. Ask whether the proposed arrangement is a new loan, refinancing or restructuring.
Is there a penalty for settling a personal loan early?
Some personal loans impose an early settlement or cancellation fee, while others may require advance notice or the return of a rebate. Check your agreement and request an official settlement figure from the provider.
Is refinancing the same as debt consolidation?
No. Refinancing generally replaces one loan with another, while debt consolidation combines multiple eligible debts into one facility or repayment arrangement. The appropriate option depends on the number and types of debts you hold.
Final Thoughts
Whether you should refinance a personal loan in Singapore depends on the actual savings, your monthly budget and how long you will remain in debt.
Start by obtaining the current settlement figure and calculating the total of your remaining instalments. Compare these amounts with the new loan’s EIR, fees, monthly instalment and total repayment.
Refinancing may be worthwhile when it provides clear net savings or a genuinely more sustainable repayment plan. If it only lowers the monthly instalment by extending the debt substantially, continuing with the current loan may cost less overall.
Related Guides
- Personal Loan in Singapore
- Effective Interest Rate vs Advertised Interest Rate
- Personal Loan vs Balance Transfer
- Debt Consolidation Plan in Singapore
- Tips Before Taking a Loan
Yannie Woon
Starting out as a freelance writer, Yannie quickly realised she had a gift for explaining money matters in a way that didn't make people want to tear their hair out. When she's not cracking jokes about compound interest, Yannie enjoys attending industry seminars, engaging with financial experts on social media, and volunteering her time and expertise to help those in need.
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