As brokers become an increasingly important distribution channel for personal loans, new research reveals that borrower stress levels are on the rise.
A new survey by comparison website Finder.com.au shows almost half (47 per cent) of all Australians with a personal loan feel anxious, stressed or trapped by their debt.
The most common reasons people take out personal loans are for the purchase of a car, followed by debt consolidation, holidays and student loans. Rounding out the top five categories is short-term loans.
This follows a significant rise in the number of Australians searching and applying for personal loans on finder.com.au, with a 40 per cent increase in traffic in the first quarter of 2016 against 2015.
According to the survey, the most expensive personal loans are for debt consolidation, averaging $20,248, followed by student loans ($15,980) and car purchase ($11,357).
The survey also found the average Australian personal loan balance sits at $12,643.
Finder.com.au money expert Bessie Hassan said paying off a personal loan of $12,643 over five years would mean monthly repayments of $274, based on the average personal loan interest rate of 10.91 per cent.
“Debt is usually a result of spending more than you earn or have so it’s not surprising to find so many Australians feel stressed or anxious about their debts,” Ms Hassan said.
“It’s a quick fix for some but it’s time Australians reassess their love affair with debt. The burden of tens of thousands of dollars in personal loans is clearly too much for some.”
The survey found that on average, Australians have 31 months left to pay off their personal loans.
“For this loan size, you would end up paying $16,459 over five years, with more than $3,800 in interest charges,” Ms Hassan said.
“Before turning to a personal loan, be sure to budget and design a repayment plan.”