Quick answer: A true refinance normally needs the existing loan paid out. Depending on the new lender, settlement may be direct to the old lender or borrower-managed. Get an exact payout figure and confirm the old account actually closes.
This question appears verbatim in borrower discussions because the settlement mechanics are rarely explained in advertising.
First: obtain an exact payout figure
It may include:
- outstanding principal;
- accrued interest;
- fixed-rate/early payout cost;
- account fees;
- a validity date.
Direct payout versus borrower-managed
Some lenders settle the old facility directly. Others may release funds subject to instructions.
Before signing, ask:
- Who obtains the payout?
- Who sends the money?
- What date is the figure valid to?
- What if settlement is delayed?
- When is the old direct debit cancelled?
Why an extra amount may be needed
If the payout is $14,280 but the borrower applies for exactly the displayed $14,000 balance, settlement can fail or require extra cash.
Confirm closure afterwards
Check the old balance is zero and the account is closed. If a scheduled debit occurs around settlement, reconcile it.
General information only. Approval, pricing, fees and eligibility depend on the lender, borrower circumstances and contract.
Frequently asked questions
Does the new lender usually pay the old lender?
Often in a structured refinance, but confirm the exact process.
Why is payout higher than my balance?
Accrued interest and early payout or other fees can make it higher.
Should I cancel the old direct debit first?
Not until settlement timing is clear, otherwise you may create a missed payment.
What if the payout quote expires?
A fresh quote may be required.
How do I know the refinance is finished?
Confirm the old account has a zero balance and is closed.
Sources and verification
Related GPS Finance resources
Want to compare a personal-loan option?
Start with the amount and purpose. We’ll review likely lender fit before you decide whether to formally apply.
