An increasing number of Australians are using consumer credit to provide the funds for big purchases, new data has revealed.
The latest consumer demand index from Veda, a provider of consumer and commercial data intelligence and insights, shows that applications have increased 4.1 per cent over the past year.
However, this has not been the case across all sectors – credit card applications are down two per cent year-on-year and mortgage enquiries have remained largely flat.
During the December 2012 quarter, the number of applications for credit cards has declined 1.5 per cent in New South Wales, 2.3 per cent in Victoria, 2.5 per cent in Queensland, 1.5 per cent in South Australia and 5.3 per cent in Tasmania.
In fact, Western Australia was the only state where more people have applied for credit cards over the past year.
“The continuing weakness in credit cards and mortgage enquiries still indicates that the attitude of consumers towards borrowing is still broadly one of caution.
“While there are encouraging signs, it’s still too early to call a sustained turnaround in the weak consumer credit environment of the past few years,” explained Angus Luffman, general manager of consumer risk at Veda.
Further analysis from Mr Luffman indicated that growth in car buying over the past year may be one of the reasons why so many people have decided to take out personal loans.
This suggests that sentiment is improving enough for people to want to make big-ticket purchases, even in the three months running up to Christmas.
Planning for larger purchases
Ideally, people should have the money they need for larger purchases set aside, so the next time they need a new car, they don’t have to rely on credit.
This is where the expertise of a financial planner can come in handy – they can put your money into perspective and offer guidance on how to make the most of it.
It might not always be possible to know exactly when you will need to replace a car or move house, but knowing there is money that can be accessed somewhere can give greater peace of mind.
Waiting for that big expense to come around is often not the best option – making financial provisions for you and your family sooner rather than later can offer you all reassurance.
Turning to credit is usually considered a last resort, so do what you can to avoid taking on debt.