What is Personal Loan Refinancing?

What is Personal Loan Refinancing?

Loan refinancing replaces your current personal loan with a new one, at a lower rate, a different tenure or both. Count fees of up to 4.72% and 4.13% before you switch.
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Rs. 40,000 - Rs. 55 lakh

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Last updated: 12th October, 2026



In summary

Loan refinancing means taking a new loan to pay off an existing one, so you repay under new terms. It saves money only when the interest you save is larger than the fees you pay to switch.


  • A rate cut from 15% to 10% per annum on Rs. 1,00,000 over 36 months (3 years) lowers the equated monthly instalment (EMI) from Rs. 3,467 to Rs. 3,227.
  • Stretching the same loan to 60 months (5 years) lowers the EMI to Rs. 2,125 but raises total interest.
  • Foreclosing a Bajaj Finance Term Loan can cost up to 4.72% of the outstanding amount.
  • A new Bajaj Finance Personal Loan carries a processing fee of up to 4.13%.

Before you refinance, add up both fees and compare them with your interest saving. A Bajaj Finance Personal Loan EMI calculator helps you test the numbers.

What is loan refinancing?

Loan refinancing is replacing an existing loan with a new loan on different terms. The new loan pays off the old one, and you then repay only the new lender. Borrowers refinance to get a lower interest rate, a lower EMI or a different tenure.


Refinancing does not erase your debt or reduce what you owe on the day you switch. It changes the price and the schedule on which you repay it, and it can come with fees on both the old and the new loan.

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How does a refinance work?

  1. Assess your current loan: Note your interest rate, outstanding balance, remaining tenure and foreclosure charges.
  2. Check your credit score: Get your credit report, correct any errors, and improve a low score before you apply.
  3. Compare lenders: Compare banks and non-banking financial companies on rates, tenure and fees.
  4. Gather documents: Keep income proof, tax returns and your existing loan details ready.
  5. Submit your application: Once approved, the new lender pays off your old loan.
  6. Review the new terms: Check the rate, fees and repayment schedule before you sign.
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Does a lower EMI always mean you save?

No. A lower EMI can come from a lower rate, a longer tenure, or both. Only a lower rate at the same tenure cuts your total interest for certain.

The source example, recalculated


Scenario (Rs. 1,00,000)Monthly EMITotal interest
Current: 15% per annum, 36 months (3 years)Rs. 3,467Rs. 24,795
Refinanced: 10% per annum, 36 months (3 years)Rs. 3,227Rs. 16,162
Refinanced: 10% per annum, 60 months (5 years)Rs. 2,125Rs. 27,482

At the same tenure, refinancing saves Rs. 8,633 in interest. Stretching to 60 months (5 years) cuts the EMI to Rs. 2,125, but you pay Rs. 2,687 more interest than on the original loan.

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When do fees cancel out the saving?

Two fees decide whether refinancing pays off. Your current lender may charge for closing the loan early, and your new lender charges a processing fee.


FeeBajaj Finance figure
Full pre-payment (Term Loan)Up to 4.72% of the outstanding amount, inclusive of applicable taxes
Processing fee on a new Personal LoanUp to 4.13% of the loan amount, inclusive of applicable taxes

Other lenders set their own charges. Check your loan agreement and the new lender's Key Fact Statement.


Worked example: Aditya in Nagpur

Aditya is 34 and works as a salaried civil engineer in Nagpur. He earns Rs. 75,000 a month, and his CIBIL score has risen from 690 to 770. He owes Rs. 3,00,000 on a Term Loan at 18% per annum with 36 months (3 years) left. A new lender offers 13% per annum for the same 36 months (3 years).


EMI = P × R × (1 + R)^N ÷ [(1 + R)^N − 1], where R is the monthly rate and N is the tenure in months. All figures are rounded to the nearest rupee.


ItemCurrent loan (18%)Refinanced loan (13%)
Monthly EMIRs. 10,846Rs. 10,108
Total interest over 36 months (3 years)Rs. 90,446Rs. 63,895
Interest saved Rs. 26,551
Foreclosure charge at up to 4.72% Up to Rs. 14,160
Processing fee at up to 4.13% Up to Rs. 12,390
Net saving at the maximum fees Rs. 1

At the maximum fees, Aditya's saving almost exactly matches his costs. Refinancing pays off for him only if one or both fees come in lower, or if the rate gap is wider.


What can delay approval: a CIBIL score below 650, high existing EMIs relative to income, mismatched document details or several recent loan applications.

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What types of refinancing will you hear about?

TypeWhat it meansApplies to personal loans in India
Rate-and-termA new loan with a different rate, tenure or bothYes
Cash-outBorrowing more than you owe and taking the differenceThe personal loan equivalent is a top-up loan
No-costFees folded into a higher rate or the loan amountA mortgage term in other markets; check total cost
StreamlineSimplified refinance for US government-backed mortgagesNo
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What are the pros and cons of refinancing?

ProsCons
Lower interest rateFees on both the old and new loan
Lower monthly EMILonger repayment period if you extend the tenure
Improved loan termsHard enquiry on your credit report
One payment if you consolidate loansHigher total cost if fees exceed the saving

Read more about the pros and cons of refinancing. Weigh each con against the saving you calculated above.

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Does refinancing hurt your credit score?

The effect is short-lived. The new lender runs a hard enquiry, which can lower your score slightly. On-time payments on the new loan help your score recover, and a lower EMI can make those payments easier to keep up.

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How is refinancing different from restructuring?

Refinancing replaces your loan with a new loan, often from a new lender. Restructuring changes the terms of your existing loan with the same lender, without a new agreement, and is offered for temporary repayment difficulty.

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When should you refinance a personal loan?

  • A lender offers a lower interest rate at the same or a shorter tenure.
  • Your CIBIL score has improved, which can bring better rate offers.
  • Your income has risen, so you can shorten the tenure and pay less interest.
  • You need a lower EMI and accept the higher total interest of a longer tenure.
  • You want to add or remove a co-applicant.
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Which alternatives should you compare?

OptionSuits you ifTrade-off
Part-prepay your current loanYou have spare cash and your loan allows itTerm Loan part-prepayment can cost up to 4.72%; Flexi Loans carry no part-prepayment charge
Personal Loan Balance TransferYou want to move the loan to a lower rateSame fee check as refinancing
RestructuringYou face temporary repayment difficultyCan affect your credit history; terms vary
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How can a Bajaj Finance Personal Loan help?

A Bajaj Finance Personal Loan can be used to refinance an existing loan, subject to eligibility. Compare the personal loan interest rate and charges with your current loan first.


FeatureBajaj Finance Personal Loan
Loan amountRs. Rs. 40,000 to Rs. Rs. 55 lakh
Interest rate10% to 30.5% per annum, subject to eligibility
Tenure12 months to 108 months (1 years to 9 years)
DisbursalWithin 24 hours* of approval, subject to verification

*Terms and conditions apply.


Learn how interest rates work before you compare offers. When the numbers add up, apply for a personal loan.

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Key offerings: 3 loan types

  • Flexi Hybrid Loan
  • Flexi Dropline Loan
  • Term Loan

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    You can pay interest-only EMIs for up to 36 months, after which, the EMI will consist of both, the principal and the interest. EMI is applicable only on the withdrawn amount.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Withdraw and prepay – no extra charges
    You can withdraw from your limit and prepay as many times as you want, without extra charges.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest on the loan amount you withdraw.

  • Flexi facility charges
    Flexi facility charges applicable based on your loan amount.

  • Amount disbursed in one go
    The entire loan amount is disbursed at the start.

  • Instalment pattern
    Fixed EMIs that cover both the principal and interest.

  • Flexi facility charges
    No Flexi facility charges.

Personal loan interest rate and applicable charges

Type of fee

Applicable charges

Rate of interest per annum

10% to 30.5% p.a.

Processing fees

Up to 4.13% of the loan amount (inclusive of applicable taxes).

Flexi Facility Charge

Term Loan – Not applicable

Flexi Loans –Up To Rs 1,999 To Up To Rs 18,999/- (Inclusive Of Applicable Taxes)

Will be deducted upfront from loan amount.

Bounce charges

Rs. 700 to Rs. 1,200/- per bounce

“Bounce charges” shall mean charges for (i) dishonor of any payment instrument; or (ii) non-payment of instalment (s) on their respective due dates due to dishonor of payment mandate or non-registration of the payment mandate or any other reason.

Part-prepayment charges

Full Pre-payment:

  • Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount as on the date of full pre-payment

  • Flexi Term (Dropline) Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

  • Flexi Hybrid Term Loan: Up to 4.72% (Inclusive of applicable taxes) on the outstanding loan amount, as on the date of full prepayment.

Part Pre-payment

  • Up to 4.72% (Inclusive of applicable taxes) of the principal amount of Loan prepaid on the date of such part Pre-Payment.

  • Not Applicable for Flexi Term (Dropline) Loan and Flexi Hybrid Term Loan.

Penal charge

Delay in payment of instalment(s) shall attract Penal Charge at the rate of up to 36% per annum per instalment from the respective due date until the date of receipt of the full instalment(s) amount.

Stamp duty (as per respective state)

Payable as per state laws and deducted upfront from loan amount.

Annual maintenance charges

Term Loan: Not applicable

Flexi Term (Dropline) Loan:

Up to 0.295% (Inclusive of applicable taxes) of the Dropline limit (as per the repayment schedule) on the date of levy of such charges.


Flexi Hybrid Term Loan:

Up to 0.472% (Inclusive Of Applicable Taxes) Of The Dropline Limit During Initial Tenure. Up to 0.295% (Inclusive Of Applicable Taxes) Of Dropline Limit During Subsequent Tenure

Credit guarantee scheme feeUp to 1.18% p.a. (pro-rated daily till 31st March) (inclusive of all applicable taxes) of the loan amount
Credit guarantee scheme renewal feeUp to 1.18% p.a. (inclusive of all applicable taxes) on the outstanding loan amount as on April 01 of the subsequent Financial Year.
*Renewal Fee to be collected only for 3 subsequent financial years.
 
**If the Remaining Tenure is less than 12 months, the CG Fee in subsequent years shall be charged prorated.

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Frequently asked questions

Costs and savings

Process and credit

How do you work out whether refinancing is worth it?

Subtract the new loan's total interest from your current loan's remaining interest, at the same tenure. Then subtract the foreclosure charge on the old loan and the processing fee on the new one. If the result is positive, refinancing saves money. In the example above, a 5-point rate cut on Rs. 3 lakh saves about Rs. 1 at maximum fees.

Yes. If you extend the tenure, the EMI falls even when total interest rises. Refinancing Rs. 1,00,000 at 10% per annum over 60 months (5 years) gives an EMI of Rs. 2,125, but total interest is Rs. 27,482. That is more than the Rs. 24,795 you would pay over 36 months (3 years) at 15% per annum.

A hard enquiry can lower your score slightly when the new lender checks your report. Its effect fades as you build a record of on-time payments on the new loan. Avoid applying to several lenders at once, because multiple enquiries in a short span can lower your score further and may lead to rejection.

You can ask your current lender for better terms, but that is often handled as a rate revision or restructuring rather than a new loan. Refinancing means a new loan, often from a different lender. Compare both routes on rate, tenure and fees before you decide which one costs less overall.

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Bajaj Finance Limited has the sole and absolute discretion, without assigning any reason to accept or reject any application. Terms and conditions apply*.
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