Personal loan applications are booming and the reason is surprising. New loans, new lenders and new ways of borrowing are driving new demand for an old traditional banking product.
"New entrants" to the personal loan market, including marketplace lenders, peer-to-peer lenders and new “fintech” innovators are drumming up demand for consumer credit. The credit reference agency Veda has released their latest Consumer Credit Demand Index and it shows that the volume of credit card and personal loan applications lifted by a very significant 7.7 per cent last month. Veda said this demand is "stronger than expected."
Veda’s Angus Luffman reports that the results were driven "largely by activity in personal loan applications, with growth predominantly coming from products offered by new entrants in the personal lending space, beyond traditional credit card and auto finance markets,"
Luffman said consumers are "taking advantage of the increased product options on offer to meet their needs." This is clear, he said, because "the total debt outstanding on personal credit has consistently fallen since the start of 2016."
Who are the new personal loan providers?
InfoChoice lists personal loans from all the major Australian banks, credit unions and other responsible lenders. InfoChoice does not list the products offered by payday lenders and other small loan providers that the Australian Securities and investment Commission has warned consumers about. Some of the new lenders providing innovative personal lending products include:
SocietyOne is a marketplace lender now offering loans with rates starting at 7.88 per cent.
RateSetter is a peer-to-peer lender with unsecured personal loan rates based on your credit score and starting from 4.04 per cent.
DirectMoney, a relatively new non-bank lender with unsecured personal loan rates starting at 8.75 per cent.
Latitude Money is making waves in the personal loan market with a high profile marketing campaign and unsecured personal loan rates starting at 9.99 per cent.
Umi has personal loans for a wide range of purposes with rates starting at 11.99 per cent.
Gateway Credit Union is a rebranded traditional credit union that is pushing hard to sell more personal loans. Right now they have fixed rate loans for debt consolidation with rates starting at 10.59 per cent.
Now Finance has unsecured personal loan rates from 11.95 per cent.
How to find a good personal loan
Personal loan rates are higher than home loan rates. Unsecured personal loan rates and charges are higher than car loan rates and personal loans that are secured against another asset. Some lenders will offer you a better rate based on your credit rating.
Look for the comparison rate to compare total loan costs. This is particularly important when choosing a personal loan because almost all personal loans have significant fees and charges. Don’t assume that your own bank is the best place to get a personal loan. Smaller lenders almost always have better rates and cheaper personal loans than the big banks.
Use the free InfoChoice Personal Loan Calculator to work out what you can afford before applying for a personal loan.
You can compare unsecured personal loans here.
You can compare car loans here.
You can compare the market of personal loans here.