If you want to know, does refinancing a personal loan hurt your credit? The answer is;
Yes refinancing a personal loan can temporarily hurt your credit, but the long-term effects may actually improve your score if managed well.
When you apply for a refinanced loan, the lender will likely run a hard inquiry, which can lower your score slightly.
Once your new loan is approved, opening it may reduce the average age of your credit accounts, potentially lowering your score.
Meanwhile, paying off your old loan closes that account. Although it stays on your credit report, its removal over time can shorten your credit history, which might also dip your score.
However, these are mostly short-term effects. If you make all your payments on time for the refinanced loan, your credit score can bounce back and even improve over time.
Also, if you’re refinancing multiple personal loans into a single one, reducing the number of active accounts can positively impact your credit mix.
I hope this helps!
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Usually, refinancing a personal loan entails taking out a new loan in place of your existing one. Your monthly payments are made by the new arrangement, and the money from the new loan helps pay down the previous debt. But does refinancing a personal loan hurt your credit? Your credit score may be temporarily impacted by refinancing a personal loan.
Does Refinancing Affect Your Credit Score?
Yes. Refinancing a personal loan in India can slightly impact your credit score, but the effect is usually temporary if managed properly.
When you apply for a new loan to refinance, the new lender performs a hard credit inquiry, which typically causes a small dip in your score.
Additionally, opening a new loan account can shorten the average age of your credit accounts, which may further affect your score temporarily.
However, once you refinance, if you use the new loan to pay off multiple existing loans or consolidate debt, this can reduce the number of open accounts with balances, potentially boosting your score over time.
After refinancing, making consistent on‑time payments on the new loan will help restore and even improve your credit score over a few months.
While refinancing incurs certain costs, like foreclosure, processing, or origination fees, it can still be financially beneficial if it leads to lower interest rates.
If you refinance a personal loan, your credit score may suffer. Pay back the loan EMIs on schedule to lessen the impact.
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Does Refinancing a Personal Loan Hurt Your Credit?
shikha
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2025-06-17T12:09:10+00:00 2025-06-17T12:09:12+00:00Comment
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