Australians are borrowing record amounts in personal loans as a long-term buildup in living costs wipes out savings buffers.<\/p>\n
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.<\/p>\n
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.<\/p>\n
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.<\/p>\n
Issuance of personal loans had fallen to less than $2bn per quarter from 2017 to 2021, when inflation and housing costs were lower, but rose sharply when interest rates began rising.<\/p>\n
New personal loans charged an average 9% interest in March, while new mortgage rates averaged 5.9%, according to the Reserve Bank.<\/p>\n
Graph of total new loan commitments ($m) by quarter<\/a><\/p>\n \u201cInterest rates have risen [and] rents \u2026 and mortgages have gone up, so getting through the week has gotten a lot more challenging for people,\u201d Grant said.<\/p>\n \u201cPeople are under a bit more financial stress and they feel like they may need a bit of assistance.\u201d<\/p>\n 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.<\/p>\n \u201cAs inflation is starting to grow, there\u2019s not as much spare money for people to work around,\u201d he said.<\/p>\n Sign up for the Breaking News Australia email<\/a><\/p>\n 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.<\/p>\n 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.<\/p>\n Banks had been steadily cutting their total stock of personal and other non-mortgage loans since 2015, prudential regulator data shows.<\/p>\n The RBA in 2019 attributed this to banks\u2019 lower \u201crisk appetite\u201d and stronger responsible lending obligations. It also pointed to mortgage-holders\u2019 ability to access offset and drawdown accounts to fund personal spending.<\/p>\n