Australians collectively borrow around $2.5 billion each month in fixed-term personal loans, according to the Australian Bureau of Statistics.

That figure excludes refinancing of existing personal loans, which accounts for another $200 million in loans each month.

The level of personal loan borrowing in Australia has been rising steadily since April 2020, following a sharp decline in the very early part of the COVID-19 pandemic. Personal loan borrowing levels are now at an all time high.

Recent trends for the reasons people are borrowing appear consistent with wider economic conditions and consumer priorities.

"Personal investment borrowing decreased sharply throughout the whole year, while borrowing for more essential items (road vehicles and “other” category) increased," explained Dr Thuy To, Deputy Head (Education) of the School of Banking and Finance, UNSW Business School.

"This may suggest that some consumers are increasingly relying on borrowing to cope with rising cost of living pressures".

Looking ahead, Dr To said borrowing for vehicle purchases may not continue at its current rate of growth. Improved vehicle supply in 2023 means many people have by now got the vehicle they were waiting, which may reduce the need for new finance.

At the same time, the ability of borrowers to access loans for other purposes may be impacted by cost of living pressures.

In 2023, the average interest rate quoted to personal loan borrowers is 13.87% p.a., according to Money.com.au borrower data. That's for unsecured personal loans – secured car loan interest rates tend to be lower.

Personal loan interest rates have been increasing in recent years line with increases in Australia’s official cash rate.

Compared to products like home loans and credit cards, interest rates on personal loans tend to vary to a far greater extent based on the details in the loan application. The customer’s credit score generally has the most significant impact.

Among borrowers with the highest credit scores, the average interest rate quoted was 9.79% p.a., while borrowers looking for a bad credit personal loan (credit scores between 0 and 459) were quoted 25.25% p.a.

By far the most common reason people take out a personal loan in Australia is to purchase a vehicle (59% of all loans), according to the loan requests received by Money.com.au in 2023. That includes car loans and loans for other vehicle types like caravans, motorcycles and boats.

For unsecured loans, the most common purposes are:

The remaining loan requests were made up of a mixture of other purposes, such as loans for investing, paying for a wedding, and covering vehicle repairs and other bills.

The average personal loan in Australia is $22,643, based on thousands of loan requests received by Money.

The average borrower requests a loan term of 35.4 months (just under three years), and the average personal loan interest rate quoted is 13.87% p.a. This would mean the average personal loan borrower in Australia is paying back around $178 per week.

These figures are based on unsecured personal loans and exclude secured vehicle loans, which have a much higher average loan amount of $34,827.

Because of the wide range of purposes a personal loan can be used for, the actual loan amount requested varies significantly depending on what the loan is funding.

On average, borrowers in the Australian Capital Territory take out the largest personal loans – $30,388 on average. Borrowers in South Australia also borrow more on average than most other parts of the country, with an average personal loan request of $26,266.

Borrowers in the Northern Territory request the lowest average amount of all the states or territories – $19,168.

Across other parts of Australia the average personal loan is more or less in line with the overall average.

Younger borrowers borrow less with a personal loan on average than older borrowers, Money borrower data shows. For example, borrowers aged 18-24 years borrow about 50% less than borrowers in the 45-54 and 55-64 years age groups.

That trend then reverses for borrowers aged above 65 years, who on average borrow less than those in the age groups immediately below.

This overall pattern is what you might expect given personal loan borrowing capacity is closely aligned to income and the borrower’s ability to repay the amount borrowed.

Data from personal loan provider Plenti shows the borrowers in their 40s (31%) are most likely to take out a personal loan, followed by those in their 30s (26%) and 50s (22%). Only 14% of personal borrowers are in their 20s, while 7% are over 60.

Plenti’s data shows that personal loan borrowers most commonly fall into the $50,000 - $100,000 income bracket (43% of borrowers) and are a homeowner with a mortgage (47%).

Personal loan borrowers in Australia have a credit score of 801 on average, according to lender Wisr. This means that the average personal loan borrower has a ‘very good’ or ‘excellent’ credit score. However, this is lower than the overall average credit score in Australia, which is 846.

Over time, the average credit score of personal loan borrowers has been steadily increasing.