PL Purchase

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PL Purchase

Further research found that Australians purchase personal loans for a variety of reasons. The majority of Australians who take out a personal loan do so in order to buy a car. Other popular causes include home renovation, weddings, education and travel. However, due to closed borders as a result of the global pandemic, travel loans declined almost 100% in 2020. Additionally, consumers tend to purchase personal loans throughout the year but data from 2019 shows that the biggest spending months were January, February, September and October.

Why Consumers Borrow

  • The two graphs below are from the Australian Bureau of Statistics for data collected monthly from 2004 to July 2020. The first graph shows new loan commitments for personal fixed term loans (seasonally adjusted) while the second graph shows a more detailed breakdown highlighting smaller purposes of fixed term loans for personal finance. From the graphs, we can see that personal loans for purchase of road vehicles accounts for the largest value, followed by personal investments (excluding housing) and external refinancing.

When Consumers Borrow

  • The first graph above is most useful to determine when consumers purchase personal loans across the calendar year. Looking at the line for "Total purpose excluding refinancing", the peaks representing higher amounts purchased tend to occur in half-year cycles around July and January so we can assume consumers are most likely to take out personal loans during these months.
  • In 2019, there was increase of $30 billion in outstanding personal loan amounts between June and August according to the Reserve Bank of Australia.
  • A Finder survey of more than 11,000 Australians found that 23% plan to purchase a personal loan in the next six months, as of August 2020.
  • Furthermore, those in the Northern territory are most likely to have a personal loan within six months, with 32% of residents saying so, followed by 23% of residents in New South Wales.
  • The attached spreadsheet gives the new loan commitments for personal finance taken out in Australia during 2019, as recorded in the Australian Bureau of Standards' Lending Indicators publication. Due to new data collection methods that took effect from October 2019 as explained in this document, the absolute values for January through September look markedly different from those for October through December. However, the monthly and year percent changes are calculated in the same way for all the data and can give some indication of the most recent calendar year purchases, prior to COVID-19.
  • Based on the trend data (as opposed to the seasonally adjusted data), it can be said that in absolute amount most consumers purchase personal loans in January and February which coincides with the Australian summer and the time of most travel. Additionally, the data shows the highest monthly increase of 1% in the value of new loan commitments in the months of September and October.
  • Lastly, research has shown that 46% of those aged between 24 and 38 (that is, the Millennial generation) have signed up for at least one personal loan which is more than any other age cohort.

Research Strategy

To calculate the percentage of the total personal loan amount in May for each of the categories listed in the table above, we followed the calculation:
(Amount of loan category in May 2020/Total personal loan amount (excluding refinancing) in May 2020)*100
For example, for road vehicle loans — (882,000,000/1,430,000,000)*100 = 61.6%
In terms of research regarding when consumers purchase personal loans throughout the calendar year, there were no high level trends to be found in other industry reports, research studies, white papers, or news articles except the study published by Plenti that was referenced in the initial hour of research. Therefore, we used the value of new loan commitments for personal finance as reported by the Australian Bureau of Statistics for 2019 and 2020 to give an indication of the most recent purchase trends over a calendar year period, in terms of the absolute amount borrowed and the monthly percent change in commitment values.

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