Consumer demand for credit cards and personal loans is on the rise, while arrears continue to climb across multiple product types, according to the latest insights from global data, analytics and technology company, Equifax.
The Equifax Quarterly Consumer Credit Insights measures the volume of credit applications for credit cards, personal loans, buy now pay later (BNPL), mortgages and auto loans.
Unsecured credit demand, comprising credit cards, personal loans and buy now pay later, decreased 2.8% in the September quarter; an improvement on the June quarter, when unsecured credit demand fell 8% year-on-year.
This slower rate of decline was driven by ongoing growth in credit card demand, up 6.9% in Q2 2023 versus the same period 2022, and a resurgence in personal loan applications (8.2%). BNPL was the only unsecured credit type to show a decline in Q3 (27%).
Equifax general manager advisory and solutions, Kevin James said, “Cost of living pressures are impacting household budgets, with consumers using unsecured credit to help them manage expenses. This quarter we’ve seen a turnaround in demand for personal loans, which suggests that consumers are trying to consolidate their debts and keep their finances under control. However, using unsecured credit to make ends meet is not a viable long-term strategy for consumers who are feeling financial strain and can create bad debt cycles if they can’t keep up with repayments.
“We’re also seeing arrears continue to rise across multiple portfolios. Late delinquency rates for credit cards are at their highest since 2021, with the number of accounts in 90+ days past due arrears up 19% year-on-year. According to our data, the squeeze on household budgets is hitting consumers aged 31-40 the hardest – this cohort had a higher percentage of accounts in late arrears in August than the national average for Q3.”