If you’re wondering if you can refinance a personal loan, the short answer is yes. Refinancing a loan could be a good option in some cases, such as when your credit score improves and if you’re looking for a better interest rate. It could also be helpful if you need to extend your repayment term and reduce your monthly payment amount.

But refinancing a personal loan isn’t right for everyone — or in all financial situations.

For some, like those with a high interest rate on a present personal loan, taking out something like a balance transfer credit card with a low introductory APR might be a remedy. You could pay less interest over time through a balance transfer to a credit card  — but only if you’re able to pay off the balance within the introductory period.

Also, balance transfer credit cards may have a balance transfer fee of 3% to 5% of the transferred amount and have a variable APR that can make interest costs unpredictable.

Here’s more detail about when you should (and shouldn’t) refinance your loan, things to consider when choosing a lender, and how to get started:

You can refinance a personal loan by taking out a new loan to pay off the existing one. This new loan will come with its own interest rate and repayment term. To qualify, you may need to meet stricter borrowing requirements than you did with the original loan. After all, not all lenders have the same eligibility criteria.

It’s not always possible to refinance your personal loan through the same lender. If your lender doesn’t offer this option, you may need to shop around for an online lender, credit union, or bank that does offer refinancing.

Related: Learn more about getting a personal loan on Credible.com

Refinancing an existing personal loan could be a good option if:

Even though you can refinance a personal loan, that doesn’t always mean you should. Here are the main reasons why you might want to hold off:

If you want to refinance a personal loan, you’ll need to apply for a new loan with the same or a different lender. Once you receive the funds, you can use them to pay off the original loan. You’ll then need to make payments on the refinanced loan — including any interest or lender’s fees — as usual.

Here’s a step-by-step guide to refinancing your loan.

Refinancing a personal loan essentially means paying off your original loan with a new one that has its own term, rates, and potential fees. When deciding how much to borrow, make sure the new loan is large enough to cover the original one — including any extra charges. If you’re not sure how much you need, use a personal loan calculator.

If you don’t already know your credit score, get a copy of your credit report from the three major credit reporting agencies — Experian, Equifax, and TransUnion. Or request your credit report for free from AnnualCreditReport.com.

Checking your credit score early in this process helps you determine if anything needs to be addressed. It can also give you time to check for errors in your credit report. Errors in your credit report could cause you to pay more for loans or other financing products, in certain situations. For instance, if you are being mistakenly reported as having an old debt collections recorded, that impacts your credit health. So, it’s a good idea to dispute any discovered inaccuracies quickly.

Shop around for different lenders — including your current one — and compare their interest rates, fees, repayment terms, and borrowing requirements. This will help you find the best lender for your situation.

Prequalifying for a loan lets you compare different loan offers without negatively impacting your credit score. This way, you can shop around without commitment or penalty.

After reviewing lenders, select the one that best fits your needs and apply either in person or online. You will need to provide personal and financial information to apply. This could include documents to verify your income (such as paystubs, tax documents, and recent bank statements) and identity (like a driver’s license, military-issued ID, Social Security number).

Once you’ve applied, wait for the lender’s decision. The time to approval and funding depends on the lender. Some lenders, like Achieve, offer funds within 24 to 72 hours.

Keep making payments on your original loan until you receive funds for the new one. Get written confirmation that the refinanced loan has been closed before stopping payments on the original loan. Then, use the new loan to pay off the old one. If you’re not sure how to do this, ask your current lender about the process.

You can check your credit report to see if the original loan has been repaid, but it might take about 30 to 60 days. Alternatively, request an original letter of documentation indicating that the original loan has a zero balance.

Finally, start making payments on your new loan until you pay it off. If you’re worried about missing a payment, set up automatic payments. And as always, consider making extra payments, if possible, to end your debt ahead of schedule.

Before refinancing a personal loan, here are some things to consider:

A refinanced personal loan could hurt your credit score in three main ways:

With that said, making timely payments toward a new, refinanced personal loan should improve your credit score over time, particularly if you make on-time payments and progressively diminish your outstanding balance.

Before making a final decision about refinancing a personal loan, consider the following pros and cons.

Related: Learn more about getting a personal loan on Credible.com