No longer stigmatized: Personal loans surge almost 100% during the pandemic

by Micah Guiao16 Nov 2021

Asset finance aggregator Platform Finance noted an almost 100% growth in personal loans in the Q1 FY22 compared to Q1 FY21, with home improvements and debt consolidation as the key drivers of this surge.

Ryan Young, chief executive officer of Platform Finance, said the demand for personal loans took off between August and October 2020 when people began to face the reality of the pandemic.

“Once the initial pandemic shock wore off and people realised they weren’t going to be travelling for a while, the focus quickly shifted to fixing up homes and paying down debt,” Young said.

Home renovations accounted for 23% of personal loans in Q3 2021, while debt consolidation followed closely at 21%, according to figures from Latitude, Platform Finance’s lender panel.

Aside from these, Damian Mantini, director of aggregation and strategic partnerships at Platform Finance, also attributed this surge to a greater funder interest in personal loans and low interest rates offered to strong credit profiles.

This is especially applicable for prime funders with credit scores over 850, who were quick to take advantage of fallen rates to increase their flexibility.

“Risk-based credit assessments mean we are seeing rates in some instances under 6%, which is a huge drawcard for borrowers,” Young said. “Personal loans are a great alternative and there are many instances where they are easier than a secured-asset loan for certain asset types and also a better option than, say, a buy-now-pay-later product or using your credit card.”

Platform Finance has six lenders on its personal finance panel, namely Latitude, Wisr, MoneyPlace, NOW Finance, SocietyOne and Plenti, but is always looking for more to help mortgage and asset finance brokers ease into personal lending.

“Funding diversity is crucial; it’s vital to have choice to meet customers’ needs,” Young said. “We’re catering for brokers at all levels – from those who are new to the personal lending space to those who specialise in it or are able to add it as a value-add for their customers.”

Young believes that this growth will continue to soar way past the post-pandemic recovery as low rates for prime borrows are certain to pull in new customers for brokers. The strain in supply chains also indicates a lot of pent-up demand for goods and services.

“Before the pandemic, there were negative perceptions around this sector, but there’s been a major transformation and personal lending is now increasingly commonplace,” Mantini said. “The stigma around personal lending has broken.”