There's a quiet revolution going on in the otherwise boring world of banking: thousands of smart Aussies are cutting up their credit cards in favour of personal loans. And for very good reason, which we'll get to in a sec.
But first, back to the revolution. Personal loan borrowing is growing twice as fast in Australia as credit card debt, Mozo's analysis of the latest APRA data reveals. In fact, personal loans are fast becoming the borrowing tool of choice, particularly for those with good credit ratings.
So why are thousands of Aussies suddenly driving better borrowing deals?
1. Personal loans rates are the lowest they've been in years
While the average credit card rate is stubbornly stuck above 17%, personal loan rates are falling and have hit a new average low of 11%. Personal loans are now a vastly cheaper alternative to credit cards for big household expenses, holidays and other big ticket purchases.
2. Personal loans come with repayment plans so you can avoid decades of debt
The reason it's so easy to rack up credit card debt is that the minimum repayment is typically so low it can take decades to pay off the average balance if you're only paying the minimum each month. By contrast personal loans are designed to be paid off over a set period of your choice, commonly one to five years.
3. Good credit borrowers are being rewarded with razor sharp rates
There's a new breed of online lenders in town who are taking on the banks with rates starting from under 5% for borrowers with good credit history. The likes of RateSetter, SocietyOne and MoneyPlace offer tailored loans based on your credit record, along with fast online approvals and no nasty exit fees.
Mozo compares 186 personal loans from 43 bank and non-bank lenders. Click here to compare rates and calculate repayments, or view today's Top 10 personal loans below.