Can you transfer a personal loan to another bank? 

It is possible to effectively transfer a personal loan to another bank by refinancing your personal loan. This could let you benefit from a lower interest rate or more favourable features and benefits, though you’ll also need to keep fees and other costs in mind to help ensure you’re getting value for money.

How does transferring a personal loan work?

A personal loan can be refinanced much like a home loan – you can take out a second personal loan to pay off the first. You may decide to switch personal loan providers if you can get a lower interest rate, or features and benefits that more closely match your changing financial situation.  

You may be able to refinance with your current bank or personal loan provider by contacting them to negotiate a discount on your rate. Some lenders may be willing to be more flexible than you expect if they risk losing your business. But if your current lender isn’t willing to budge, you could instead apply to refinance your personal loan with another lender.

Much like refinancing a home loan, refinancing a personal loan may involve a few risks and costs. Exiting a personal loan early to transfer the balance to a new lender may require paying fees to both the old and new lenders. This could also include break costs if you’re exiting a fixed rate personal loan early.

It’s often worth using a personal loan repayment calculator to get a better idea of how much your new personal loan could cost, and how this could affect the total interest you’ll pay over the long term. Remember that if you switch to a personal loan with a longer loan term, you could end up paying more in total interest on your loan, even if the monthly repayments are lower.

Why transfer a personal loan?

There are several potential reasons why you might consider transferring or refinancing a personal loan, including:

To pay a lower interest rate

You may qualify for a lower personal loan interest rate from a different lender. This could potentially help you save money on each repayment, or more easily make extra repayments to pay off your loan sooner.

To borrow more money

Switching to a new lender could let you apply for a larger personal loan, such as if you need access to more cash to help pay for renovations or other household projects. Of course, a bigger loan typically also means higher repayments.

To pay over a longer loan term

Extending the length of your personal loan can help you enjoy more affordable repayments from month to month, as each one will cover a smaller percentage of the outstanding balance. However, this could increase the total interest you’ll pay on the loan over the extended period.

To consolidate debt

If you have other outstanding personal loans, car loans and/or credit cards, you may be able to take out a personal loan to consolidate these debts, giving you just the one credit product to manage in the future, simplifying your budget. Just be careful not to inadvertently build up your debt again after a balance transfer, and consider using repayment calculators so you can be confident you’re getting value for money.

Can you transfer a personal loan to a credit card?

It may also be possible to transfer a personal loan’s balance to a balance transfer credit card, depending on how much is still owing and your approved credit limits. Balance transfer credit cards often charge 0% interest for an introductory period (such as the first 12 months), giving you some time to pay off this outstanding balance without worrying about it growing due to interest charges. 

However, if the interest-free period expires, you’ll typically be charged interest on any balance still owing at a much higher rate. Also, keep in mind that most balance transfer credit cards only allow you to transfer debts from other credit cards, though a few may also accept personal loans. Plus, you’ll likely need to pay a percentage of the balance to be transferred as a balance transfer fee – if you’re transferring a significant amount from a personal loan, the cost could be more than you’d be comfortable paying.

How does your credit score affect a personal loan transfer?

When refinancing to transfer a personal loan, keep in mind that the terms and conditions you’re offered on the new loan may partially depend on your credit score. If you have a history of successfully borrowing and repaying money on time, you may have a good credit score, and a lender may be more willing to offer a lower interest rate and/or more favourable terms and conditions. But if you’ve missed repayments in the past or had a default, your bad credit could make it harder to qualify for a low-interest personal loan.

When you’re looking at transferring personal loans, try to avoid applying for personal loans with multiple different lenders at once in the hope that at least one will be successful. Each personal loan application will involve a credit check, and multiple credit checks in quick succession can make you look desperate for credit, decreasing the likelihood that your application will be approved and potentially damaging your credit score further.

What to do if you need help

If you’re having trouble affording your personal loan repayments, you could consider talking to your lender about financial hardship support. You could also consider contacting the National Debt Helpline to speak to a free financial counsellor.

Compare personal loans