According to ABS figures, short-term loan borrowing by Australian households increased in the December 2023 quarter—equating to $700 million in debt—driven by “seasonal year-end spending”, e.g. Black Friday and Christmas splurging.

Aside from a mortgage, Australians typically accumulate debt through credit cards, store cards, personal and car loans, buy-now-pay-later (BNPL) and payday loans. Once you’ve acquired three or four different debts across different providers, you can be stretched thin trying to stay on top of multiple repayments and due dates.

Data from online loan matching platform Lendela finds that three in five debt consolidation loan applications are made by people in their 20s and 30s. The number of borrowers under 30 jumped by 200% from May 2023 to May 2024.

Most borrowers looking to consolidate debt through the platform earn between $40,000 to $70,000 (65%), while around 10% of applicants have a healthy income of $100,000 or more. Most are renters but the number of borrowers with a mortgage increased considerably in the past year.

One of the biggest drivers seen by Lendela is the popularity of BNPL and payday loans—about one in three debt consolidation loans were primarily taken out for this reason.

“Australians are increasingly turning to debt consolidation loans to stretch the terms of their BNPL and payday loans from the typical 30 to 90-day terms to more manageable periods of 48 to 60 months,” according to Jake Osborne, Australia Country Manager at Lendela.

Osborne said that while many lenders were willing to restructure debts over longer periods, it was essential for borrowers to consider the total cost over the life of the loan.

“We encourage borrowers to seek options that genuinely improve their financial position, which means looking for consolidation loans that offer not just lower monthly payments but also competitive interest rates and loan terms that make financial sense in the long run.”