The September 2025 quarter saw a dramatic increase in personal loan applications across the Australian credit market as demand for unsecured borrowing grew nationwide. The rise demonstrates how consumers are relying more and more on borrowing to offset continuous pressure from rising living expenses.
Australians took out $9.3 billion in personal loans during the quarter, the highest amount since the Australian Bureau of Statistics began recording the data over 20 years ago. Demand for unsecured borrowing has surged to levels not seen since early 2016, affecting a wide range of demographics and income levels, indicating a significant shift in consumer financial behavior.
Record-Breaking Quarter: Understanding the Numbers
The September 2025 quarter delivered exceptional borrowing activity nationwide. The $9.3 billion in new personal loans represents steady growth that began in June 2020 following the initial pandemic-related decline. This figure excludes refinancing of existing loans, which accounted for an additional $1.66 billion over the same period.
The average Australian now borrows $22,643 over approximately 35.4 months. This amounts to about $178 in weekly repayments. For households already burdened by rising costs and inflation, these pledges constitute significant duties.
Depending on creditworthiness, interest rates can vary significantly. Currently, the average annual interest rate on an unsecured personal loan is 13.87%. Rates as low as 9.79 percent are available to borrowers with good credit ratings. Rates might reach 25.25 percent for those with a bad credit history. This large disparity highlights how crucial credit score management is to obtaining reasonably priced credit.
The patterns of borrowing showed regional variations. The average loan amount taken out by citizens of the Australian Capital Territory is $30,388. Borrowers from South Australia come in at $26,266. These variations reflect different economic conditions and cost-of-living pressures across states and territories.
Cost-of-Living Crisis Drives Credit Reliance
The connection between rising expenses and increased borrowing is unmistakable. Recent research from Equifax reveals that 33 per cent of Australians now rely on credit cards to manage their finances. Another 24 per cent use Buy Now Pay Later services. Among younger Australians, BNPL usage jumps to 38 per cent for Generation Z consumers.
Demand for unsecured credit products has increased significantly year-on-year. Australians rely more heavily on credit to cover daily living expenses. This trend appears particularly pronounced in specific employment sectors:
Sectors Experiencing Financial Strain:
Retail workers saw a 28% increase in unsecured credit applications
Hospitality employees experienced similar upward trends
Younger workers in these industries show heightened financial pressure
Many Australians deliberately work to handle their finances appropriately in spite of these constraints. Positive trends can be seen in data from Equifax's 2025 Australian Credit Scorecard. About 54 per cent of people are more likely to stick to a budget compared to a year ago. Another 51 per cent have prioritised paying down debt or moving beyond living pay cheque to pay cheque.
Analysis of loan purposes reveals distinct patterns. Vehicle purchases account for 59 per cent of all personal loans. Debt consolidation, home renovations, medical expenses and travel represent the remaining applications. The high proportion of vehicle-related borrowing reflects both ongoing supply constraints and the essential nature of private transport in many Australian communities.
Interest Rate Environment Shapes Borrowing Patterns
The Reserve Bank of Australia implemented three cash rate cuts during 2025. These reductions created a more favourable borrowing environment for consumers. The pass-through varies significantly between lenders and loan types. The average unsecured personal loan rate of 8.53 per cent per annum remains competitive compared to other forms of unsecured consumer credit.
Major banks have responded to the competitive environment with promotional campaigns. Both CommBank and NAB currently waive $250 establishment fees for unsecured personal loan applications submitted between November 2025 and February 2026. These promotions provide meaningful savings for borrowers who act during the promotional window.
Credit scoring continues playing a decisive role in determining access to competitive rates. A personal loan borrower typically keeps their credit score at 782. The national average credit score for Australia is 864, which is lower than this. The disparity shows that, on average, applicants have slightly greater credit risk profiles than the whole population.
Digital Transformation Increases the Volume of Applications
The emergence of fintech lenders has significantly altered Australians' access to personal finance products. These days, companies like Plenti, Harmoney, Wisr, and MoneyMe provide completely digital application processes that can be approved in as little as 24 to 48 hours. In order to assist customers in navigating the increasingly complicated lending sector, traditional comparison portals like MeLoan have also increased their digital capabilities.
Early in 2025, Revolut's entry into the Australian market sped up this digital revolution. Their offering features fixed interest rates from 6.56 per cent per annum with no fees and rapid fund disbursement. Growing confidence in Australia's consumer credit market is indicated by the arrival of foreign fintech companies.
In response, conventional banks have streamlined their own procedures. Many now provide current clients with solid banking records with same-day personal loans. Customers gain from the competition through more flexible terms, quicker approvals, and cheaper rates.
Key Digital Advantages:
Paperless application processes reduce barriers to entry
Borrowers can compare rates across multiple lenders without initially impacting credit scores
Complete applications entirely online
Receive funds within hours of approval
This accessibility has democratised access to credit across different income levels and employment types.
Demographic Shifts and Borrowing Patterns
Since mid-2023, loan inquiries from young Australians aged 18 to 25 have increased by 21%. This group is subject to particular financial strains, such as home affordability issues and the expense of schooling. Inflation has outpaced entry-level salaries. According to the trend, younger workers who are trying to become financially independent are especially under financial duress.
When it comes to loan approvals and rate setting, employment status is vital. Due to their steady sources of income, salaried borrowers make up the majority of applications that are approved. Lending standards are stricter for independent contractors and temporary employees. Additional paperwork is frequently needed to demonstrate income stability.
The average loan duration is now 35.4 months. This length strikes a balance between minimising overall interest expenses and offering reasonable monthly repayments. Over the course of the loan, shorter terms result in larger repayments but significant interest savings.
Consumer Protection and Financial Sustainability
Significant concerns regarding household and systemic financial viability are brought up by the spike in personal loan applications. Although credit can be a useful tool for controlling spending, relying too much on it leads to long-term financial fragility.
Warning Signs of Credit Stress:
Using credit for regular expenses rather than one-off purchases
Making only minimum repayments on existing debts
Applying for multiple loans in quick succession
Experiencing difficulty meeting current financial commitments
Regulatory reforms introduced in February 2025 now subject Buy Now Pay Later providers to stricter oversight. These changes include mandatory unsuitability assessments and fee caps. The reforms aim to enhance consumer protection and prevent inappropriate lending.
Market Outlook and Growth Trajectory
Market analysts predict that the personal loan industry in Australia will continue to grow. From 2025 to 2034, industry projections point to a compound annual growth rate of 23%. By 2034, this might increase to $13.16 billion. This growth trajectory is predicated on stable employment levels and ongoing economic stability.
Through open banking initiatives, technology will continue to change the lending market. Applications utilising artificial intelligence will expedite the application process. In response to these shifts, platforms such as MeLoan are providing consumers looking for quick access to reasonable rates with improved comparison tools and digital channels.
The competitive landscape doesn't appear to be getting any easier. Customers gain from better rates and more inventive products as traditional banks, credit unions, and fintech lenders fight for market share. However, this competition necessitates a rigorous evaluation of total loan costs and increased consumer knowledge.
Key Takeaways for Australian Households
Both economic strains and the changing Australian credit landscape are reflected in the record $9.3 billion in personal loan applications in September 2025. Many households look for credit assistance due to problems with the cost of living. Customers now have more options than they have in the past because of the wider selection of lenders and the competitive interest rate environment.
Credit will continue to be crucial to managing household finances. Making sure borrowing is sustainable and suitable for certain situations is the main problem. Making an educated choice and carefully weighing your options are necessary for this. It is nevertheless necessary to evaluate repayment capacity realistically under different economic conditions.
The information emphasises how crucial it is to keep up good credit profiles and comprehend total borrowing costs. Financial literacy and responsible credit management are becoming more and more important skills for Australian households navigating challenging economic times as personal loan applications continue to rise.
