Lending throughout Australia has increased drastically over the last year, in both personal and mortgage markets. According to the Australian Bureau of Statistics, personal finance lending has increased 11.1% over the last year, equaling $8.5 billion turnover each month, while lending in the housing market has grown 8.97% over the same time frame. It is clear that Australians need credit options to fund life’s major expenses, but the growth in personal finance lending is showing a shifting trend. Instead of taking on more credit card debt, consumers are turning to personal loans as the popularity of this option increases. There are a number of reasons to consider personal loans in lieu of traditional credit card options.

Consider the cost

Credit cards are, historically, more expensive than personal loans, as interest rates are now offered on a more variable basis and are considerably higher than those assessed on personal loans. The compounding interest charged on outstanding balances can create a challenge for borrowers as it relates to paying down credit card debt, and can create a situation where timely repayment cannot easily be made. Personal loans, on the other hand, are less expensive than credit cards due to fixed, lower interest rates, which allow a borrower to pay down debt in a manageable and consistent way.

Options for risky borrowers

Credit cards typically will not offer the same attractive options for borrowers who have bad credit. If you have missed payments on debt in the past, or have taken on too much to handle in relation to your income level, your credit file may suffer. Credit card providers are less willing to offer affordable rates or new accounts to those with spotted credit history; however, personal loans can be an option for these borrowers in a way that is both affordable and conducive to repayment.

Needs for consolidation

Because of the steady rise of debt among Australians over the last few years, the need to consolidate outstanding credit cards and loans has become a priority for some. For a consolidation to be beneficial, the borrower must be able to obtain an interest rate that is lower than what is being charged on outstanding debt. Rarely do credit cards offer those lower rates, and those lenders may not be able to provide a credit limit high enough to consolidate all debt. Personal loans, however, can be obtained for the amount borrowers need, at a considerably lower interest rate than credit card counterparts. For those borrowers looking to pay down debt for good, personal loans will not typically allow for additional withdrawals, while credit cards allow for continual spending up to the card limit. Knowing there is no option to borrow more funds may be incredibly beneficial for borrowers trying to stop the vicious cycle of debt repayment.

If you have struggled with bad credit, considered consolidation of high interest debt, or simply need an additional cash influx to cover life’s expenses, a personal loan may be a viable option – instead of a new credit card.