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The latest Lending Finance data from the Australian Bureau of Statistics (ABS) has revealed that personal loan approvals rose by 3.8 per cent in August, while housing, commercial and lease finance approvals dropped by 2.7 per cent, 1.7 per cent and 4.7 per cent, respectively.
According to a survey of 2,011 Australians by rate comparison website finder.com.au, the rise in demand has been most prevalent among Millennials.
The Finder survey revealed that almost half (48 per cent) of Millennial respondents (aged 24 to 38) have applied for a personal loan, compared to 43 per cent of Generation X, 37 per cent of Baby Boomer and 36 per cent of Generation Z respondents.
Kate Browne, personal finance analyst at Finder, observed: “They are entering a stage in their life they’re starting to earn more money and have to build up a credit history that appeals to lenders.”
The research also reported that the main reasons Millennials turn to lenders are personal loans (19 per cent), holidays (5 per cent) and unforeseen expenses such as a medical emergency or car accident (5 per cent).
Ms Browne said that personal loans can be a valuable option for borrowers, but she issued a warning over the higher interest rates applied to personal loans.
“Personal loans can have a lower interest rate than credit cards and a repayment schedule means your debt comes with an end date,” the finance analyst said.
“That said, taking out a personal loan for a consumer-driven shopping spree is very different to taking out a personal loan for a renovation which will add value to your home.
“The bigger the loan, the bigger the repayments, so it is important to take the time to compare personal loans in order to find one that’s right for you.”
[Related: Credit crunch sparks sharp drop in housing approvals]
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