Household budgets are shrinking but personal loans are on the rise

family reaching for a smaller household budget in a piggy bank containing a personal loan

The latest reports from Commonwealth Bank reveal that household spending is declining month on month, with Aussies starting to feel the impact of rate rises on their everyday budgets. This could be one of the many reasons we’re seeing an increase in personal loan commitments, with a 9.5% increase seen in the most recent statistics from the Australian Bureau of Statistics (ABS). 

Why are households spending less?

If you felt no impact from the initial Reserve Bank of Australia (RBA) decision to begin hiking rates upwards, you might be wondering when that shift towards penny-pinching really started. 

The Commonwealth Bank data backs this up, indicating the first monthly fall since the RBA began bringing rates up earlier in the year. Falls were seen in spending across home buying, health and fitness, household services, and transport. 

In actuality, it usually takes about three months for consumers to feel the full effect of rising rates, so what we are experiencing now is a cumulative impact that will only keep hitting.

At the same time, we are experiencing what many refer to as a “cost of living crisis”. While rate rises do contribute to the rising Consumer Price Index (CPI), there are many other factors at play. These include geopolitical unrest, supply chain holdups, and labour shortages.

Considering the rising prices of our grocery carts, energy bills, and even our fast food treats, it’s no surprise that Aussies are choosing to prioritise keeping costs down where they can.

Meanwhile, year-on-year household spending is still up, according to ABS statistics. This is more likely a reflection of last year’s pandemic conditions, rather than this year’s amazing financial climate. In fact, according to Westpac, consumer confidence is reaching nearly historic lows.

What does the rising popularity of personal loans tell us?

In order to keep on top of these rising costs, personal loans are apparently becoming an even more popular way for people to stay on top of their expenses. 

Since the average unsecured personal loan has no restriction on where money is spent, these are a desirable alternative to other forms of credit. 

Personal loans may carry lower interest rates than comparable credit cards, making them preferable when it comes to larger amounts that can’t be paid off in a monthly billing period. Note that credit cards offer interest free days and many have introductory interest free periods, making them still worthwhile for many occasions - but you’ll have to choose carefully!

Aussies may be having an easier time acquiring these loans as well, with relatively stable credit scores in spite of the past years of financial uncertainty. 

Make sense of lending with our guide to easy personal loans and some tips to busting debt before 2023. To find our expert favourites, read up on Mozo’s best personal loans.

Compare personal loans - last updated 1 March 2024

Search promoted personal loans below or do a full Mozo database search. Advertiser disclosure
  • Mozo Expert Choice Badge
    Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    6.75% p.a.to 26.95% p.a.
    6.75% p.a.to 26.95% p.a.based on $30,000
    over 5 years

    Borrow up to $50,000 unsecured. Perfect if you earn more than $22,100 p.a. and have good to excellent credit. Multi-year winner of Mozo’s Experts Choice Unsecured Personal Loan Award, 2021, 2022, 2023 & 2024^'

    Repayment terms from 2 years to 7 years. Representative example: a 5 year $30,000 loan at 6.75% would cost $35,430.23 including fees.

    Compare
    Details
  • Unsecured Personal Loan

    Fixed

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.55% p.a.to 24.98% p.a.based on $30,000
    over 5 years

    Fast, easy and 100% online, this is a low cost loan with no ongoing fees or extra repayment penalties. It's perfect for savvy borrowers with great credit. If you’re over 18 and earn above $30,000, you could qualify (other eligibility criteria may apply).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

    Compare
    Details
  • Express Personal Loan

    Secured

    interest rate
    comparison rate
    Monthly repayment
    14.95% p.a.to 27.95% p.a.
    29.30% p.a.to 42.8% p.a.based on $10,000
    over 3 years

    Access fast finance on loans from $5,000 to $25,000 with a Jacaranda Finance Personal Loan. Terms from 24-48 months. Check if you qualify with no impact on your credit score. Enjoy a speedy, online approval.

    Repayment terms from 2 years to 4 years. Representative example: a 3 year $10,000 loan at 14.95% would cost $14,324.71 including fees.

    Compare
    Details
  • Debt Consolidation Loan

    interest rate
    comparison rate
    Monthly repayment
    5.76% p.a.to 24.03% p.a.
    6.57% p.a.to 24.99% p.a.based on $30,000
    over 5 years

    Roll multiple debts into one loan to streamline your finances with one set of repayments and one interest rate. Competitive fixed interest rates with no monthly or early repayment fees and flexible repayment options. Easy online application and funding in as little as 24 hours (subject to approval).

    Repayment terms from 3 years to 7 years. Representative example: a 5 year $30,000 loan at 5.76% would cost $35,173.52 including fees.

    Compare
    Details