Refinance a Personal Loan for a Lower Rate?

This calculator estimates the monthly payment and total interest on a personal loan from its principal, APR, and term; it does not determine whether refinancing will lower your costs. Enter the proposed loan’s amount, APR, and term to see the scheduled payment and interest before fees.

Formula

The calculator uses the fixed-payment amortization formula. Let P be the amount borrowed in dollars, a the annual percentage rate (APR) in percent, r = a / 1200 the monthly rate as a decimal, and n = 12 × y the number of monthly payments for a term of y years.

• Monthly payment: M = P × r / [1 − (1 + r)⁻ⁿ], rounded to the nearest cent.
• Estimated total interest: I = M × n − P, using the rounded monthly payment.

For a refinance comparison, calculate the proposed loan with its new amount, APR, and term. Calculate the existing loan separately using its remaining balance, current APR, and remaining term. The new loan amount may differ from the old balance if fees are added or cash is included, so use the amount the lender actually proposes rather than assuming the balances match.

Worked Example

Using the calculator’s default inputs—$20,000 principal, 8% APR, and 5 years:

1. Convert the APR to a monthly rate: r = 8 / 1200 = 0.0066667.
2. Convert the term to payments: n = 5 × 12 = 60.
3. Apply the payment formula: M = 20,000 × 0.0066667 / [1 − (1.0066667)⁻⁶⁰] ≈ $405.53.
4. Use the rounded payment to estimate total interest: I = $405.53 × 60 − $20,000 = $4,331.80.

These are scheduled-payment estimates under the formula’s assumptions. A lender’s payment or total can differ because of fees, payment dates, rounding, or other terms.

Assumptions

• The APR and payment are fixed for the full term.
• Payments are equal, made monthly, and begin one month after borrowing.
• Interest compounds monthly at APR divided by 12.
• Fees, taxes, insurance, late charges, and other costs are not included; this calculator has no inputs for them.

How Refinancing Can Change Loan Costs

Refinancing generally means taking out a new loan to pay off an existing one. A lower APR can reduce interest, but the rate alone does not settle whether the new loan costs less overall. The amount refinanced, remaining time, fees, and new repayment term all matter. Extending the term can reduce the monthly payment while increasing the total interest paid, because the balance remains outstanding for longer.

For a useful comparison, look at the remaining scheduled payments on the current loan and compare them with the new loan’s scheduled payments plus any charges you would pay separately. Avoid comparing the new loan against the original amount and original term: past payments have already occurred. Also distinguish the new loan’s total interest from the amount due at closing, which may include principal and fees.

How to Compare a Refinance Offer

1. Get the current payoff amount and the remaining payment schedule from the existing lender. A payoff figure can differ from the balance shown on a statement because of accrued interest or timing.
2. Ask for the proposed loan amount, APR, term, payment, fee details, and total repayment figures in writing. Enter the actual proposed amount, not just the old balance.
3. Compare monthly payments and total remaining outlay separately. A payment reduction is not proof of a lower overall cost.
4. Account for upfront charges and any fees added to the principal. If fees are rolled into the loan, they can accrue interest too.
5. Check whether the offer uses a fixed or variable rate and whether it includes conditions that could change the payment. The calculator models only a fixed rate.

For example, consider a borrower with $10,000 left to repay over two years. A new offer with a lower payment but a five-year term may cost more in total interest than continuing the shorter schedule. The exact outcome depends on the offer’s APR, fees, and payment terms; enter those figures rather than relying on the payment amount alone.

Costs, Limits, and Common Misunderstandings

A lower APR does not automatically mean a lower total cost. Origination or other lender charges may be paid upfront or included in the new balance. Some contracts may also specify charges or conditions for paying off the old debt; read the existing agreement and request a payoff quote. This calculator cannot assess those items or establish what rules apply to a particular borrower.

Another common misconception is that a lower monthly payment means money has been saved. It may simply reflect a longer term. Conversely, a higher payment on a shorter term can accompany less total interest. Compare both payment size and total remaining outlay, and ensure the periods being compared are the same.

The estimate also does not model irregular payments, late payments, changing rates, skipped-payment arrangements, or daily interest calculations. APR is an annualized disclosure measure, while the formula approximates interest using a monthly rate. Use the lender’s repayment schedule for the exact contractual figures.

Alternatives and Safety

Before applying for a new loan, a borrower can ask the current lender for a payoff schedule or whether the existing payment terms can be changed. Other ways to examine repayment include making payments according to the current schedule or paying extra toward principal, if the contract permits and the lender applies the extra amount as intended. These possibilities have different costs and conditions; this calculator does not compare them.

Share personal and financial information only through a verified lender channel, and review documents before agreeing to a loan. Check that the amount, APR, term, payment, and all charges match the written offer. Do not rely on a quoted monthly payment alone when the full repayment terms are available.

Frequently Asked Questions

Can I refinance a personal loan to get a lower interest rate?
Possibly, but eligibility and offered terms depend on the lender’s assessment. Compare the written APR and full repayment costs, including fees, rather than assuming a lower rate is available.

Will refinancing lower my monthly payment?
It can, particularly if the new term is longer, but a lower payment can come with more total interest. Use the proposed loan amount, APR, and term to estimate the payment, then compare total costs.

Does a lower APR always save money?
No. Fees, a larger new balance, or a longer repayment period can outweigh an APR reduction. Compare the new loan’s total outlay with the remaining cost of the current loan.

Should I include refinance fees in the loan amount?
If the proposed loan adds fees to the amount borrowed, include that higher principal in the calculation. If fees are paid upfront, account for them separately when comparing total outlay.

Is this calculator’s result the exact amount a lender will charge?
No. It is a fixed-rate estimate based on monthly payments and does not include fees or lender-specific calculations. The lender’s disclosure gives the exact figures.

This result is an estimate; the lender’s disclosure gives the exact figures.

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in p | Loan amount | $ | 20000 | 1 | 100000000
in apr | Interest rate (APR) | % | 8 | 0.01 | 100
in yrs | Loan term | years | 5 | 0.0833 | 50
out pmt | Monthly payment | $ | p * (apr / 1200) / (1 - (1 + apr / 1200) ^ -(yrs * 12)) | 2
out int | Total interest | $ | pmt * yrs * 12 - p | 2