Personal Loan Refinance Calculator

What This Calculator Does

The Personal Loan Refinance Calculator helps you compare your current personal loan with a potential refinanced loan, allowing you to see how much you could save in monthly and total payments. By entering your loan details and potential refinancing terms, you can quickly evaluate whether refinancing is a smart financial move. This tool is designed for anyone seeking a clear, side-by-side analysis of their existing loan and new refinancing options, making it easier to plan for your financial future.

How to Use This Calculator

1. Enter your current loan details: Fill in your current balance, interest rate, remaining term, and monthly payment. These values give the calculator an accurate picture of your existing loan.
2. Input refinancing information: Provide the new interest rate, new loan term, and any one-time refinancing fee you expect to pay. These numbers will be used to estimate your new payment and savings.
3. Add your personal financial details: Enter your monthly income and monthly expenses to see how the new loan fits into your budget. Include your credit score, as this can affect the rates you may qualify for.
4. Review your results: The calculator will display your new monthly payment, monthly savings, total savings over the life of the loan, and the break-even period for your refinancing decision.
5. Compare scenarios: Adjust the new interest rate, loan term, or refinancing fee to see how different options affect your savings and monthly payments.

Definitions of Key Terms

Current Balance

The remaining principal amount owed on your existing personal loan.

Current Interest Rate

The annual percentage rate (APR) currently applied to your loan balance.

Remaining Term

The number of months left until your current loan is fully paid off.

Current Monthly Payment

The amount you currently pay each month toward your personal loan, including both principal and interest.

New Interest Rate

The annual percentage rate you expect to receive if you refinance your loan.

New Loan Term

The new loan’s repayment period, typically measured in months, after refinancing.

Refinancing Fee

Any one-time charges or closing costs associated with taking out a new loan, such as lender fees or application fees.

Monthly Income

Your total gross income every month, used to assess your ability to manage loan payments.

Monthly Expenses

The sum of all your regular monthly spending, including rent, utilities, food, and other debts.

Credit Score

A number representing your creditworthiness, which lenders use to determine your eligibility and the rates you can receive.

New Monthly Payment

The estimated monthly payment you would make on your refinanced loan, calculated using the new rate and term.

Monthly Savings

The difference between your current and new monthly payments, showing how much you could save each month by refinancing.

Total Savings

Your total cost reduction over the life of the new loan, factoring in all payments and refinancing fees.

Break-even Period

The number of months needed for your monthly savings to recover the refinancing fee, after which refinancing results in net savings.

Calculation Methodology

Calculate current loan payoff:
Current Remaining Balance = user input
Current Interest Rate = user input (annual, as percentage)
Remaining Term = user input (months)
Current Monthly Payment = user input

Calculate new loan payment:
New Interest Rate = user input (annual, as percentage)
New Loan Term = user input (months)
Refinancing Fee = user input

Monthly Interest Rate (current) = Current Interest Rate / 12 / 100
Monthly Interest Rate (new) = New Interest Rate / 12 / 100

Current Total Cost = (Current Monthly Payment * Remaining Term)
New Monthly Payment = [Current Balance * Monthly Interest Rate (new)] / [1 - (1 + Monthly Interest Rate (new))^(-New Loan Term)]
New Total Cost = (New Monthly Payment * New Loan Term) + Refinancing Fee

Monthly Savings = Current Monthly Payment - New Monthly Payment
Total Savings = Current Total Cost - New Total Cost

Break-even Period = Refinancing Fee / Monthly Savings

The calculator uses your input values to estimate your new monthly payment based on standard loan amortization formulas. It then compares your current loan’s total cost to the estimated cost of refinancing, including any upfront fees, to display your monthly and total savings, as well as how many months it will take for your savings to outweigh the refinancing costs. These calculations are based on common financial formulas and assumptions, providing you with a reliable estimate for decision-making.

Practical Scenarios

• Lowering Your Interest Rate: Suppose you have a $12,000 personal loan at an 11 percent interest rate, with 36 months left and monthly payments of $393. You receive an offer to refinance at 7.5 percent for 36 months with a $200 fee. By entering these values, the calculator shows your new payment and how much you could save every month and in total by switching to the lower rate, helping you decide if it’s worth the cost.
• Extending Your Loan Term for Lower Payments: You are struggling with your current monthly payment and want some budget relief. Your remaining balance is $8,000 at 10 percent interest over 24 months, but you could refinance at 8 percent over 48 months with a $150 fee. The calculator helps you see your new, lower payment, but also the impact on total interest paid, so you can weigh lower payments against higher overall costs.
• Comparing Offers Based on Credit Score: If your credit score has improved, you may qualify for better rates. You enter your new score and see how your potential rates and payments change. This helps you shop for the best refinancing offer and understand how your credit affects your savings.
• Budget Planning with Income and Expenses: You want to make sure your refinanced payment fits comfortably within your budget. By entering your monthly income and expenses, the calculator guides you in assessing whether the new payment is manageable and how it affects your financial goals, such as saving or investing.

Advanced Tips & Best Practices

• Factor in All Fees and Costs: Always include any application, origination, or closing fees in your refinancing estimate. Even small fees can impact your break-even period and total savings.
• Check for Prepayment Penalties: Review your current loan agreement for early repayment charges. If applicable, add these to your refinancing fee to get an accurate savings estimate.
• Consider Loan Term Trade-offs: Extending your loan term reduces monthly payments but increases total interest paid. Use the calculator to balance payment relief against long-term costs.
• Regularly Monitor Your Credit Score: A higher credit score often unlocks better refinancing rates. Check your score before refinancing, and consider taking steps to improve it for more favorable offers.
• Run Multiple Scenarios: Experiment with different new interest rates, loan terms, and fees to fully understand your options. A small change in rates or terms can significantly affect your savings and budget.

Frequently Asked Questions (Optional)

Will refinancing hurt my credit score?

Applying for a new loan can result in a hard credit inquiry, which may temporarily lower your score by a few points. However, regular on-time payments on your new loan can help strengthen your credit over time.

What if I have a prepayment penalty on my current loan?

If your current loan charges a fee for early repayment, add this amount to your refinancing fee in the calculator. This ensures your savings and break-even period calculations are accurate.

Should I always choose the lowest monthly payment?

Not necessarily. While a lower payment eases your monthly budget, it can increase the total interest you pay over time. Use the calculator to compare both monthly and total savings to make the best choice for your financial goals.