Australians are borrowing record amounts in personal loans as a long-term buildup in living costs wipes out savings buffers. New personal loans issued by banks reached a record $5.1bn in the first three months of 2026, according to Australian Bureau of Statistics data.
While personal loans can be used to fund big-ticket items such as weddings, overseas trips or home renovations, they are also used to pay off regular bills or other debts.
Financial Pressure on the Rise
Andrew Grant, a professor of finance at the University of Sydney, said an increase in personal loans was typically a sign of intense financial pressure, often taken out by people who are struggling to make it paycheck to paycheck.
Issuance of personal loans had fallen to less than $2bn per quarter from 2017 to 2021, when inflation and housing costs were lower, but rose sharply when interest rates began rising. New personal loans charged an average 9% interest in March, while new mortgage rates averaged 5.9%, according to the Reserve Bank.
“Interest rates have risen [and] rents … and mortgages have gone up, so getting through the week has gotten a lot more challenging for people,” Grant said. “People are under a bit more financial stress and they feel like they may need a bit of assistance.”
Refinancing and Debt Consolidation
Personal refinancing loans have also steadily risen, which Grant said could indicate Australians have been increasingly forced to consolidate or pay off other personal debts. “As inflation is starting to grow, there’s not as much spare money for people to work around,” he said.
Car loans have not grown at the same rate, holding steady at over $4.7bn in new loans issued each quarter since 2024, the data shows.
Separate RBA data released on Wednesday showed personal lending has grown 4.3% in the year to April, continuing a resurgence that started in 2023. Banks had been steadily cutting their total stock of personal and other non-mortgage loans since 2015, prudential regulator data shows.
The RBA in 2019 attributed this to banks’ lower “risk appetite” and stronger responsible lending obligations. It also pointed to mortgage-holders’ ability to access offset and drawdown accounts to fund personal spending.
Market Shift and Regulation
Kevin James, chief solutions officer at credit monitoring agency Equifax, says the market for personal loans had also been “chewed up” by buy-now, pay-later companies until they faced stronger regulation in 2025. “It became more regulated and had more friction, then I think people changed and were quite happy to do a personal loan,” James said.
Equifax has recorded steady growth in applications for personal loans over the past two years, but falling applications for buy-now, pay-later credit and car loans.
ANZ said demand for “unsecured credit” through personal loans had been gradually increasing due to customers’ demands and the broader economy. Westpac’s chief executive, Anthony Miller, said personal loan inquiries had increased again in April after the Reserve Bank raised interest rates twice in the preceding two months. The RBA hiked rates again in May.
Commonwealth Bank began rebuilding its consumer loan book in 2022 and now has more than $16bn on issue. ANZ followed in 2023, while Westpac and Macquarie turned around last year.
Non-Bank Lenders and Pawnshops
Latitude, a major non-bank lender, estimates major banks are responsible for the “vast majority” of personal lending. Latitude still reported record loan applications and granted $3.3bn in loans for the year to June 2025, reporting that its non-vehicle loans over 2025 were spent on home improvement (38%), debt consolidation (24%), travel (15%) and other miscellaneous personal spending.
Pawnshop Cash Converters, which previously focused on payday loans, has also moved into larger personal loans.
Concerns Over Automated Approvals
Kristy Robson, a managing financial counsellor at the Consumer Action Law Centre, said the growth in lending had been accelerated by automatic online loan approvals. “The frictionless approval processes are damaging people’s financial capacity,” Robson said. “It’s become so automated that individual customers’ circumstances aren’t being considered appropriately, and they’re getting same-day approval on massive personal loans that they’re reaching for because they’re in financial hardship.”
The national debt helpline has seen an increase in people calling in with issues due to personal loans, Robson said. “People really are struggling to make it through,” she said. “How, with the responsible lending laws, are they possibly getting approved?”
