When you’re paying off a loan, the thought of switching to one with a lower interest rate can feel tempting. After all, who doesn’t want to save money? But before you make the move, it’s important to understand how it works, and whether it will really leave you better off.
APR stands for annual percentage rate. It shows you the true cost of borrowing over a year, including interest and any compulsory fees. Generally, the lower the APR, the less you’ll pay overall – so yes, a lower APR can be better. But that doesn’t mean you should automatically switch. Other factors, like fees for repaying your old loan early, the length of your new loan term, or changes in your monthly repayments, all matter too.
Before you decide, think about:
Early repayment charges – Does your current lender charge a fee if you pay off your loan early? These costs could eat into the savings from a lower APR.
Loan term – A new loan spread over a longer period might reduce your monthly payments but cost you more overall.
Total cost – Compare the total you’d pay over the lifetime of both loans, not just the monthly instalments.
Your credit score – A better credit score can unlock lower rates. If your score has improved since you took out your current loan, you might be eligible for cheaper options.
Check your credit score for free with ClearScore.
How to switch safely If you do find a cheaper loan that looks like a good fit: Use an eligibility checker – This shows you which loans you’re more likely to be accepted for, without affecting your score.
Try ClearScore’s loan eligibility checker.
Apply for your new loan first – Wait until the money is in your account before paying off your old loan. Settle your old loan in full – Make sure your old balance is cleared straight away, otherwise you could end up with two loans at once.
So, is lower APR better? Most of the time, yes – but it’s not the only thing that matters. Think about the bigger picture: fees, terms, and your long-term financial goals. Switching can be a smart move if it genuinely saves you money. And remember, you can explore your options in minutes with ClearScore – and see the loans you’re more likely to get, with your chances of approval clearly shown. 👉 See your personalised loan options now