New personal lending bounces back in May as vehicle loans jump

New personal lending bounces back in May as vehicle loans jump

New personal lending saw a rebound in May for the first time this year, fresh data from the Australian Bureau of Statistics (ABS) show.

The value of new personal loan commitments surged by 14.5 per cent to $1.43 billion in May, up from $1.25 billion in April. 

This followed a steep plunge of about 25 per cent in April, which was its biggest recorded monthly fall in nearly two decades. The ABS attributed the sharp decline to COVID-19 impacts.

A loan commitment is a loan that has been approved by a lender and accepted by a borrower, according to the ABS.

However, new personal lending overall is still at low levels, the ABS noted, despite a record-low cash rate. New personal loan commitments dropped by 10.8 per cent in the 12 months to May 2020.

Personal loan refinances bumped up slightly by 5.5 per cent to more than $122 million in May. It was the first increase in refinancing since the start of the year.

But longer-term numbers show there is a growing trend for refinancing, with a nearly 12 per cent increase in refinancing over the year to May 2020.

What borrowers took out loans for in May

The increase in new personal lending was thanks to a jump in new road vehicle loans, which was up by more than 40 per cent in May. The rise in road vehicle loans followed a 37.5 per cent drop in April and came ahead of end-of-financial-year sales in June, when new vehicle sales activity saw a notable leap.

“The rise in the value of new loan commitments for fixed term personal finance was driven by a partial rebound in the value of new loan commitments for road vehicles”, ABS chief economist Bruce Hockman said.

It was not just road vehicle loans which saw an increase, loans for other transport vehicles and equipment also surged by 46 per cent in May.

But new lending for road vehicles and other transport vehicles still saw a decline over the year to May 2020, down by 13.5 per cent.

  Mar 2020 ($) Apr 2020 ($) May 2020 ($) Apr20-May 20 change May 19-May 20 change
Total personal loans (excluding refinancing) $1.66 billion $1.25 billion $1.43 billion 14.5% -10.8%
Road vehicle loans $1 billion $625 million $882 million 41.1% -13.5%
Other transport vehicle and equipment loans $45 million $30.9 million $45.2 million 46.2% -22.3%
Loans for the purchase of household and personal goods $119 million $103 million $94.9 million -7.8% -0.73%
Travel and holidays $20 million $2.2 million $2.1 million -4.5% -94.7%
Personal investment (excluding housing) $162 million $250 million $206 million -17.6% 46.7%
Refinances $160.5 million $116.4 million $122.8 million 5.5% 11.6%

Source: ABS.

In particular, personal loans for travel dropped a further 4.5 per cent in May and plummeted by almost 95 per cent since May 2019. 

Lending for travel may continue to drop, with Australia’s bans on international travel not expected to be lifted until at least some time next year. Domestic travel is also taking a hit due to a resurge in COVID-19 cases in parts of Victoria, with several state borders, including that of NSW, Queensland and South Australia, recently closing to Victorians. 

Personal lending fell in every other category in May. Loans for personal non-housing investment, down nearly 18 per cent, led the falls. But it also highest rate of growth over the year with a surge of some 47 per cent, indicating the volatile nature of this type of lending.

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Learn more about personal loans

How long does it take to get a $5000 loan?

Depending on the lender, personal loans and medium-amount loans for $5000 can sometimes be approved in under an hour, and give you access to the money the same day. Other loans may take 24 hours or longer to assess your application, and you may not get the money for a few days.

Can single mothers get personal loans online?

Many lenders offer online applications for personal loans, which can be convenient for borrowers who have busy lives. If you’re not confident your personal loan application will be approved, you may want to consider contacting the lender by email, live chat, phone, or by visiting a branch, to discuss your situation before applying.

Do student personal loans require security?

While some personal loans can be secured by the value of an asset, such as a car or equity in a property, student personal loans are often unsecured, which typically have higher interest rates.

Some lenders also offer guarantor personal loans to students. These loans have lower interest rates, as a guarantor (usually a relative of the borrower with good credit) will fully or partially guarantee the loan, taking on the financial responsibility if the borrower defaults.

How long does it take to get a student personal loan?

Completing an online personal loan application can often take anywhere from 10 minutes to 1 hour. Depending on your lender, processing your personal loan application may take anywhere between 1 and 24 hours. If your personal loan application is approved, you may receive the money in your bank account the following business day, or, in some cases, the same day.

How can I improve my credit rating/score?

Your credit score will improve if you demonstrate that you’ve become more credit-worthy. You can do that by minimising loan applications, clearing up defaults and paying bills on time.

Another tip is to get the one free credit report you’re entitled to each year – that way, you’ll be able to identify and fix any errors.

If you want to fix an error, the first thing you should do is speak with the credit reporting body, which may take care of the problem or contact credit providers on your behalf.

The next step would be to contact your credit provider. If that doesn’t work, you can refer the matter to the credit provider’s independent dispute resolution scheme, which would be the Australian Financial Complaints Authority (AFCA).

AFCA provides consumers and small businesses with fair, free and independent dispute resolution for financial complaints.

If that doesn’t work, your final options are to contact the Privacy Commissioner and then the Office of the Information Commissioner.

What documentation is needed for a self-employed personal loan?

Personal loans may require a borrower to provide proof of identity, proof of residence, details of any other outstanding loans (including credit cards), details of assets they own (e.g. savings, car, property), and proof of income.

While borrowers in full-time or part-time employment can often provide payslips and similar documents to prove their income, self-employed borrowers may need to provide other documents, such as bank statements or tax returns, to demonstrate that their income can cover a loan’s repayments.

How are credit ratings/scores calculated?

Different credit reporting bodies may use different formulas to calculate credit scores. However, they use the same type of information: credit history and demographic profile.

They’re likely to look at how many credit applications you’ve made, which lender the applications were for, what purpose they were for, how much they were for and your repayment record. They’ll also look at your age and postcode. They’ll also look to see if you’ve had any bankruptcies or other relevant legal judgements against you.

Your score can change if your demographic profile changes or new information is added to your file (such as a new loan application) or existing information is removed from your file (i.e. because it has reached its expiry date).

Can I repay a $3000 personal loan early?

If you receive a financial windfall (e.g. tax refund, inheritance, bonus), using some of this money to make extra repayments onto your personal loan or medium amount loan could help reduce the total interest you’re charged on your loan, or help clear your debt ahead of schedule.

Check your loan’s terms and conditions before paying extra onto your loan, as some lenders charge fees for making extra repayments, or early exit fees for clearing your debt ahead of the agreed term.

How can I get a $3000 loan approved?

Responsible lenders don’t have guaranteed approval for personal loans and medium amount loans, as the lender will want to check that you can afford the loan repayments on your current income without ending up in financial hardship.

Having a good credit score can increase the likelihood of your personal loan application being approved. Bad credit borrowers who opt for a medium amount loan with no credit checks may need to prove they can afford the repayments on their current income. Centrelink payments may not count, so you should check with the lender prior to making an application.

Are there $2000 emergency loans?

If you’re having trouble being approved for a loan of less than $2000 and urgently need to purchase household essentials, there may be emergency loan options available to you.

For example, the No Interest Loans Scheme (NILS) allows low-income borrowers to take out interest-free loans of up to $1500 for essential goods and services.

For further assistance, consider contacting a financial counsellor, or calling the National Debt Helpline on 1300 007 007

Will comprehensive credit reporting change my credit score?

Comprehensive credit reporting may change your credit score, either positively or negatively, depending on an individual's situation.

Under comprehensive credit reporting, credit providers will share more information, both positive and negative, about how you and other Australians manage credit products. That means credit reporting bureaus will be able to make a more thorough assessment of everyone’s credit behaviour. That will lead to higher scores for some consumers and lower scores for others.

Can I get a $2000 loan on Centrelink?

If more than half of your income comes from Centrelink benefits, it may be more difficult to have a $2000 loan application approved. Many lenders will check if you can afford a loan’s repayments on the income from your job before they’ll approve an application, and many won’t count Centrelink payments when assessing your income for this purpose.

Some lenders may offer $2000 loans to borrowers on Centrelink – consider contacting potential lenders to check before applying.

What do single parents need for a personal loan application?

Much like applying for other personal loans, applying for personal loans for single parents will likely require the following:

  • Proof of identity
  • Proof of residence
  • Proof of income
  • Details of assets (e.g. car, home)
  • Details of liabilities (e.g. credit cards, other loans)
  • Loan amount
  • Loan term

What is a credit rating/score?

Your credit rating or credit score is a number that summarises how credit-worthy you are based on your credit history.

The lower your score, the more likely you are to be denied a loan or forced to pay a higher interest rate.