Cars, pets, braces – why Aussies are borrowing from ASX non-bank lenders

Non-bank lender Wisr says from January 1 to June 30, car loans was the most popular reason for borrowing on its platform
Plenti says customers are increasingly using personal loans for home improvements, new appliances or preparing their house for sale

Ever wondered what is the main reason for people borrowing money beyond a mortgage? Is it a new car, to consolidate debt… what about a house renovation, overseas holiday or does little Johnny need braces to straighten those crooked teeth?

Are people borrowing money just to keep up with the increased cost of living – a concern for many with inflation proving stickier than anticipated and hopes of interest-rate cuts all but dashed for 2024? (In Australia, at least.)

Australians are increasingly turning to non-bank lenders for a loan, which, according to the Reserve Bank of Australia now account for 5% of total financial system assets.

There are many reasons for the increased popularity of non-bank lenders, and these include: flexible lending terms for borrowers who may not meet meet strict bank criteria, specialised financial products, quicker approvals for faster access to funds and innovative digital platforms driving growth and market reach.

Read: Why ASX non-bank lenders could be shaping the future of finance in Australia

But just what are Aussies needing funds for when borrowing from non-bank lenders? Stockhead asked some ASX lenders the popular reasons behind their loans.

Wisr (ASX:WZR)

Wisr notes that from January 1 to June 30, car loans was the most popular reason, followed by home renovations and debt consolidation.

But there were some other surprising reasons for drawing a loan as well. Chief growth officer James Goodwin told Stockhead the firm’s loans are built to support Australians in reaching their personal goals.

“We offer loans for any worthwhile purpose with loans being used on everything from braces, adopting a puppy to even honeymoons,” he says.

“While some of these situations are quite specific, there are some key trends on how our customers have been using their loans.”

Goodwin says notably, over the last six months, WZR has seen a number of customers use their loans for home improvements and renovations.

“The current inflationary environment and rising interest rates has unsurprisingly changed how Australians are directing their money and uplifting their existing homes has been of particular interest,” he says.

“There’s also been an increase in the number of customers using their loans for debt consolidation which can be a really effective way to reduce debt quickly and improve your credit score.

“It’s actually a great option for those juggling multiple repayments as it can help cut down on interest paid on loans as well as simplify everything into a single repayment.”

Plenti Group (ASX:PLT)

Chief commercial officer and co-founder of Plenti Group, Ben Milsom says generally speaking, across its whole business – including automotive, renewable and personal loan verticals – PLT’s top five loan purposes are pretty consistent, being to:

Purchase a car (or refinance a car loan)
Buy renewable energy assets (solar, battery, EV chargers)
Undertake home improvements or renovations
Consolidate other debts into one loan (such as high interest credit cards, other personal loans)
Make a major purchase (appliances, leisure goods etc)

Milsom says looking at PLT’s personal loan portfolio, a couple of trends have emerged over the past six months:

He says debt consolidation loans have fallen slightly, from ~25% of funded loans to ~20%. Home improvement loans have increased from ~25% of funded loans to ~30%.

“I would say that these trends reflect a couple of factors,” he says.

“Customers are increasingly using low-rate personal loans to make home improvements, upgrade appliances or prepare their house for sale as an alternative to using high-interest credit cards or drawing on their mortgage,” he says.

“Unlike some traditional options Plenti’s personal loans have no early repayment fees, so customers can make larger purchases then pay off ahead of schedule without incurring additional fees or costs.

Milsom says following a period of rising interest rates, PLT has noticed debt consolidation has slightly slowed as customers see less benefit between their current rates and what they might be able to achieve in consolidating.

“That being said, we still see strong demand for low-rate debt consolidation loans to help them reduce interest costs, simplify their budget by rolling multiple loans into one monthly payment, and get additional peace of mind knowing that they can be debt free by a fixed date,” he says.

Harmoney Corp (ASX:HMY)

Harmoney lends to consumers both in Australia and New Zealand. CEO David Stevens told Stockhead the company’s top personal loan purposes have remained very stable over time, despite changing economic conditions.

Stevens says the top reasons include:

● Debt consolidation 31%
● Home improvements 19%
● Life events 14%
● Recreation 14%
● Vehicle 11%
● Other 11%

“Our loans range from $2,000 to $70,000, with an average of ~$20,000, so are being used by prime borrowers for a significant goal or purpose,” Stevens says.

“The loan purposes have remained consistent across many years, and continue to do so, with our top purposes being debt consolidation and home improvements.”

He says customers come to Harmoney for a personal loan because the non-bank lender is easy to find online for people researching a personal loan and because of fast-turnaround times for approvals.

“Advances in technology have allowed us, with an applicant’s permission, to seamlessly access and analyse information that was previously only available to their transactional bank, enabling us to provide a 100% online application that is fast, easy and competitively priced, tailored to their individual circumstances.”

At Stockhead, we tell it like it is. While Wisr is a Stockhead advertiser, the company did not sponsor this article.