Personal Lending Is Rising in Australia

Australians are borrowing more than ever for cars, holidays, and everyday purchases, but at the same time, new regulations are making it harder for some to access the credit they need. If you’re planning to take out a personal loan or car finance in 2026, understanding these shifts could make the difference between approval and rejection.

Record Demand for Personal and Car Loans

Consumer lending hit unprecedented levels throughout 2025, with Australians collectively borrowing $9.3 billion in personal loans during the September quarter alone, according to the Australian Bureau of Statistics. By December, car loans specifically reached $4.9 billion, a 13% increase year-on-year.

Australia personal loan commitments line chart 2014–2024
Personal fixed-term loan commitments in Australia from 2014 to 2024. The chart shows total lending alongside road vehicle and other loan categories.

This surge was driven by several factors. Australians purchased a record 1,220,607 new vehicles in 2024, with Toyota, Ford, Mazda, Kia, and Mitsubishi leading sales. Improved vehicle supply after years of pandemic-related shortages meant many buyers could finally secure the cars they’d been waiting for.

But it wasn’t just vehicles. Personal loans for holidays, household goods, and other lifestyle purchases jumped by an impressive 25.9% to $3.9 billion in the December quarter. According to Equifax’s Consumer Market Pulse, this reflects growing consumer confidence and an appetite for spending beyond typical seasonal patterns.

Why Borrowers Are Turning to Personal Finance

The data tells a clear story: Australians are increasingly comfortable using credit to fund both essential and discretionary purchases.

Money.com.au reports that the average personal loan amount is now $22,643, with an average interest rate of 13.87% per annum. For car loans specifically, the average sits at $34,282 with rates around 8.92% per annum.

Several trends are driving this behaviour:

  1. Cost of living pressures: Many households are using personal loans to manage essential expenses like vehicle purchases and home improvements, rather than discretionary spending.
  1. Alternatives to credit cards: Buy Now Pay Later (BNPL) demand surged 15.7% in late 2024, suggesting consumers are seeking alternatives to traditional credit cards for managing cash flow.
  1. Confidence in rate stability: The perception that interest rates had peaked in late 2025 encouraged many to lock in financing before potential rate movements.

The New Lending Landscape: APRA’s DTI Restrictions

Just as consumer demand for credit reached record highs, the regulatory environment shifted significantly.

From 1 February 2026, the Australian Prudential Regulation Authority (APRA) introduced strict limits on high debt-to-income (DTI) lending. Banks and other authorised deposit-taking institutions can now write no more than 20% of new loans where the total debt is six times or more of a borrower’s income.

This applies separately to owner-occupiers and investors, meaning lenders must carefully manage their loan books to stay within these thresholds.

What This Means for Borrowers

The new rules don’t eliminate high-DTI loans entirely, but they do make them significantly harder to obtain. Lenders will be more selective about who qualifies, particularly for borrowers with:

  • Strong incomes but existing debts
  • Multiple credit commitments
  • High living expenses relative to income

According to Equifax’s latest analysis, lenders appear to be tightening credit limits even as demand increases, suggesting institutions are already adjusting their policies in response to the new framework.

Lender Choice Matters More Than Ever

With some banks already approaching their internal DTI limits while others have more flexibility, choosing the right lender has become critical.

This is particularly important for personal and car loans, where:

  • Assessment criteria vary significantly between lenders
  • Credit score requirements differ based on loan type and amount
  • Existing debts are weighted differently in serviceability calculations

Submitting multiple applications to different lenders can damage your credit profile. A better approach is to work with a finance broker who understands which lenders have capacity and appetite for your specific situation.

Smart Strategies for Securing Finance in 2026

If you’re planning to apply for a personal or car loan this year, consider these strategies:

Review Your Debt Position Early

Calculate your current DTI ratio before applying. If your total debts are approaching six times your income, you may need to reduce existing commitments first.

Consider Loan Alternatives

For smaller purchases, comparing personal loans against credit cards or BNPL options could reveal better rates or more flexible terms.

Improve Your Credit Profile 

Money.com.au data shows the average credit score among personal loan borrowers is 782. Checking your credit report and addressing any issues before applying can improve your chances.

Time Your Application Strategically

With lenders managing their DTI thresholds quarterly, timing can matter. Early in a quarter, lenders may have more capacity than toward the end.

Get Professional Guidance

A finance broker can assess your situation, identify suitable lenders, and structure your application to maximise approval chances while protecting your credit score.

Whether you’re looking to purchase a vehicle, fund home improvements, or consolidate existing debts, the right approach matters more than ever. If you’re ready to explore your options, contact our team at Peel Finance Brokers to discuss how we can help you secure the right finance solution for your needs.

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