Unsecured Debt in Australia: Key Risks & Repayment Strategies 2025

Australians are carrying more unsecured debt than ever before—think credit cards, personal loans, and buy-now-pay-later balances. With inflation and rising living costs squeezing household budgets, understanding unsecured debt and how to manage it has never been more crucial. In 2025, new consumer protections and financial product reforms are shaking up the landscape, making it vital to stay informed and proactive about your borrowing and repayment decisions.

What Is Unsecured Debt—and Why Does It Matter?

Unsecured debt is any loan or credit line not backed by an asset. Unlike a mortgage or car loan (which are “secured” by your house or vehicle), unsecured debts rely solely on your promise to pay. If you default, lenders can chase you for the money, but they can’t repossess your property without a court order. Common examples include:

• Credit cards: Australia’s average card balance hovered near $2,900 per cardholder at the start of 2025, with interest rates often above 19%.

• Personal loans: Used for everything from consolidating debt to funding weddings, with rates now typically ranging from 7% to over 20% depending on your credit.

• Buy-now-pay-later (BNPL): Services like Afterpay and Zip have exploded in popularity, and new 2025 regulations now classify larger BNPL loans as credit products under ASIC’s oversight.

• Overdrafts and payday loans: Short-term, high-cost options that can quickly spiral if not managed carefully.

Because unsecured debts often come with higher interest rates and less flexible terms, they can rapidly become unmanageable if not kept in check.

2025 Policy Updates: New Rules for Lenders and Borrowers

This year, Australia has introduced several significant regulatory changes to protect consumers and improve transparency:

• BNPL Regulation: From March 2025, BNPL providers must comply with the National Consumer Credit Protection Act, requiring stricter affordability checks and clearer fee disclosures. This move aims to curb over-commitment, especially among younger Australians.

• Credit Card Reform: Minimum monthly repayments now need to be more clearly explained on statements, and unsolicited credit limit increases are banned across all providers.

• Debt Management Service Licensing: Companies offering debt consolidation or negotiation services must now be licensed by ASIC, reducing the risk of predatory practices.

• Open Banking Expansion: Broader access to banking data allows borrowers to compare personal loan offers more easily, putting pressure on lenders to stay competitive.

These changes are designed to empower consumers, but they also mean you need to be more proactive in assessing your own borrowing capacity and repayment strategies.

Practical Strategies for Managing and Paying Off Unsecured Debt

If you’re feeling overwhelmed by unsecured debts, you’re not alone. But with the right approach, you can get back on track. Here’s how Australians are tackling their debt burdens in 2025:

• Debt Consolidation: Rolling multiple debts into a single lower-rate personal loan can simplify repayments and save on interest. However, with tighter lending standards post-2025 reforms, approval is based more closely on demonstrated repayment ability.

• Snowball vs. Avalanche Methods: The snowball approach pays off smaller debts first for quick wins, while the avalanche method attacks the highest-interest debt first. Both are effective—choose the one that keeps you motivated.

• Hardship Programs: All licensed lenders must now offer clear hardship assistance pathways. If you’re struggling, don’t wait—contact your lender early to discuss reduced payment plans or interest freezes.

• Budgeting Apps & Open Banking Tools: New apps use open banking data to automatically track spending, highlight debt repayments, and flag when you’re at risk of missing a payment. Many Australians are now automating minimum repayments to avoid late fees.

• Credit Report Checks: Regularly reviewing your credit report (free annually from major bureaus) helps you spot errors, identity fraud, or forgotten debts that could affect future borrowing.

Real-world example: In 2025, Sydney resident Amanda used open banking-powered platforms to compare consolidation loans, then negotiated a hardship variation with her credit card provider, ultimately reducing her monthly outgoings by $320 and shaving two years off her debt-free timeline.

The Bottom Line: Stay Informed, Stay Proactive

Unsecured debt isn’t inherently bad—it can provide flexibility and financial breathing room when managed wisely. But with higher interest rates and the proliferation of new credit products, it’s never been more important to understand your obligations and use smart repayment strategies. Stay up-to-date with 2025’s regulatory changes, use technology to your advantage, and don’t be afraid to negotiate with lenders if your circumstances change. The tools for taking control of unsecured debt have never been better—now is the time to put them to work for your financial future.