Personal Loans Hit Record High as Financial Pressure Mounts

New personal loans issued by banks reached a record $5.1 billion in the first quarter of 2026, driven by rising interest rates and shifting consumer credit habits, according to the Australian Bureau of Statistics.

"An increase in personal loans typically indicates financial pressure; people may need assistance getting through the week." — Andrew Grant, University of Sydney professor

A Sharp Reversal in Lending Trends

From 2017 to 2021, when inflation and housing costs were lower, personal loan issuance fell below $2 billion per quarter. But lending surged as interest rates began increasing, marking a dramatic reversal in consumer borrowing behaviour.

Banks had steadily reduced their personal loan stocks since 2015, citing a lower risk appetite and stronger responsible lending obligations. Meanwhile, buy-now, pay-later services had eroded demand for traditional personal loans—until tighter regulation in 2025 shifted the market once more.

"The market shifted from buy-now, pay-later back to personal loans after regulation increased friction." — Kevin James, Equifax

The Cost of Borrowing

The average interest rate on new personal loans stood at 9% in March, compared to an average mortgage rate of 5.9%, as recorded by the Reserve Bank. This significant gap highlights the premium borrowers pay for unsecured credit.

Lender Response and Market Growth

Major banks have expanded their offerings since 2022-2023:

• ANZ, Westpac, Commonwealth Bank, and Macquarie have all increased personal loan products
• Latitude, a non-bank lender, reported record loan applications and reached $3.3 billion in loans for the year to June 2025
• Cash Converters has expanded from pawnbroking into larger personal loans

Personal lending grew 4.3% year-on-year to April 2026, while Equifax recorded steady growth in loan applications over the past two years.

Car loans have remained steady at over $4.7 billion per quarter since 2024.

Concerns Over Automated Approvals

Consumer advocates warn that rapid loan growth may come at a cost.

"Automated online approvals may be approving loans without proper consideration of individual circumstances, potentially worsening financial hardship." — Kristy Robson, Consumer Action Law Centre

The National Debt Helpline has reported an increase in calls related to personal loan issues, underscoring the growing strain on households juggling higher borrowing costs.

Personal loans can be used for large purchases or to pay regular bills and other debts—but as issuance hits historic highs, experts caution that the trend reflects deeper financial stress rather than consumer confidence.