The younger generations in the country are increasingly depending on personal loans to fund their latest gadgets. A recent study by Home Credit India revealed that Gen Z and millennials are looking to buy more smartphones and other gadgets even if they can’t afford these, all thanks to personal loans.
The study, titled, ‘How India Borrows’, revealed that this desire to purchase premium smartphones and consumer electronics has led to a surge in demand for personal loans. The report showed that this has resulted in the share of credit (among personal loans) rising sharply from 1 per cent in 2020 to 37 per cent in 2024, reported Moneycontrol.
The study was conducted across 17 cities in India and included nearly 2,500 borrowers who earned Rs 31,000 a month on average. These participants were in the 18-55 age bracket. The annual report by the fintech firm tried to highlight the consumer borrowing trends in the country.
The survey further revealed that borrowing for home renovation and construction has also surged from 9 per cent in 2022 to 15 per cent in 2024. This indicated an increase in consumers’ interest in upgrading their homes, backed by a positive economic outlook and a rising desire for home ownership.
Educational loans maintained a steady demand at 4 per cent from 2022 to 2024, while borrowing for marriage-related expenses inched up to 5 per cent in 2024, against 3 per cent clocked in 2021.
However, medical emergencies-related borrowing declined from 7 per cent in 2020 to 3 per cent in 2024. This indicated an improvement in financial planning and an increase in insurance coverage amongst participants.
The report noted that loans for purchasing cars and two-wheelers accounted for 6 per cent of the overall trend in 2024, rising sharply from 1 per cent in 2020. This showed that consumers are increasingly looking for personal transportation.
While personal loans continue to rise in popularity, it is to be noted that these come with their own set of drawbacks. The high interest rates applicable to this form of credit can trap consumers in a debt trap if they fail to repay the loans or miss the equated monthly installments (EMIs). This can also impact your credit score and limit your ability to access credit in the future.
