Why smart Aussies are dumping credit cards for personal loans

Kirsty Timsans   |   04 Jul 2017

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Key Points

  • Personal loans are now a lot cheaper than credit cards

  • Personal loans are much easier to pay off than credit cards

  • Good credit borrowers can now access rates starting below 5%

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.

Top 10 Personal Loans - September 2017 - rates updated daily

  • Promoted

    Australian Military Bank

    Australian Military Bank

    Unsecured Personal Loan - Excellent Credit (Fixed)

    7.93% p.a.to 18.87% p.a.

    8.77% p.a.to 20.27% p.a.based on $30,000
    over 5 years

    $100.00upfront and $10.00/month

  • Promoted

    SocietyOne

    SocietyOne

    Unsecured Personal Loan - Excellent Credit (Fixed)

    7.50% p.a.to 9.99% p.a.

    9.51% p.a.to 12.71% p.a.based on $10,000
    over 3 years

    $300.00upfront and $0.00/month

  • Promoted

    Bank Australia

    Bank Australia

    Lifestyle Personal Loan (Variable, Unsecured)

    11.89% p.a.

    12.94% p.a.based on $10,000
    over 3 years

    $150.00upfront and $0.00/month

  • Promoted

    HSBC

    HSBC

    Unsecured Personal Loan (Fixed)

    9.50% p.a.to 15.99% p.a.

    10.06% p.a.to 16.53% p.a.based on $30,000
    over 5 years

    $150.00upfront and $5.00/month

  • Promoted

    ANZ

    ANZ

    Unsecured Personal Loan (Fixed)

    12.45% p.a.

    13.32% p.a.based on $30,000
    over 5 years

    $150.00upfront and $10.00/month

  • Promoted

    RACQ Bank

    RACQ Bank

    Unsecured Personal Loan (Variable)

    12.95% p.a.

    13.25% p.a.based on $30,000
    over 5 years

    $200.00upfront and $0.00/month

  • Promoted

    now FINANCE

    now FINANCE

    Unsecured Personal Loan - Excellent Credit (Fixed)

    7.95% p.a.to 11.45% p.a.

    9.42% p.a.to 12.9% p.a.based on $30,000
    over 5 years

    $495.00upfront and $13.00/month

  • Promoted

    CUA

    CUA

    Discount Unsecured Personal Loan (Variable)

    10.89% p.a.

    10.89% p.a.based on $30,000
    over 5 years

    $0.00upfront and $0.00/month

  • Promoted

    MoneyPlace

    MoneyPlace

    Unsecured Personal Loan - Excellent Credit Rating (Fixed)

    7.65% p.a.to 21.00% p.a.

    7.65% p.a.to 23.5% p.a.based on $30,000
    over 5 years

    $0.00upfront and $0.00/month

  • Promoted

    SocietyOne

    SocietyOne

    Unsecured Personal Loan - Excellent Credit (Fixed over 5 years)

    8.10% p.a.to 10.59% p.a.

    9.36% p.a.to 12.31% p.a.based on $30,000
    over 5 years

    $300.00upfront and $0.00/month

*The Comparison Rate combines the lender's interest rate, fees and charges into a single rate to show the true cost of a personal loan. The comparison rates displayed are calculated based on a loan of $30,000 for a term of 5 years or a loan of $10,000 for a term of 3 years as indicated, based on monthly principal and interest repayments, on a secured basis for secured loans and an unsecured basis for unsecured loans. WARNING: This comparison rate applies only to the example or examples given. Different amounts and terms will result in different comparison rates. Costs such as redraw fees or early repayment fees, and cost savings such as fee waivers, are not included in the comparison rate but may influence the cost of the loan.

More top money deals:

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