Personal loans are increasingly becoming a financial lifeline for Indians, but not necessarily for vacations or education. According to a consumer research report titled “The Personal Loan Story” by Paisabazaar, the majority of personal loans in India are taken out to cover medical emergencies.
The survey found that 11% of Indians borrow to pay for medical treatments and emergencies, with this figure rising to 14% in Tier-1 cities like Delhi, Mumbai, Kolkata, Chennai, Bengaluru, and Hyderabad. In Tier-2 cities, the percentage stands at 10%, and in Tier-3 cities at 8%, highlighting the rising healthcare costs and limited health insurance coverage.
Other Reasons for Borrowing
Beyond healthcare, personal loans are also used for essential household needs, sudden repairs, or lifestyle enhancements. About 48% of borrowers use loans for home-related expenses, 36% for lifestyle upgrades, and 16% for business purposes.
The research is based on in-depth conversations with 2,889 personal loan borrowers across 23 cities and towns. It explores why people take loans, how they make decisions, the channels they choose, and their awareness about debt, segmented by location, city tier, and age.
Borrowing Patterns in Smaller Cities
Data shows significant differences across regions. Residents of Tier-3 cities are 2.4 times more likely to take loans for everyday needs compared to Tier-1 city residents. Middle-class individuals earning ₹7.5–10 lakh annually are the largest borrowers for lifestyle-related expenses, with 40% using loans for personal lifestyle upgrades.
Changing Decision-Making
Santosh Agrawal, CEO of Paisabazaar, noted that borrowers are no longer driven solely by interest rates or eligibility. “Loan decisions are increasingly influenced by necessity, personal desires, and life milestones. Understanding this behavioral shift is crucial to offering reliable, transparent, and easy access to credit for all,” she said.
Discover more from SD NEWS agency
Subscribe to get the latest posts sent to your email.