Indian Youth Turning to Loans for Ambition, Not Necessity
A noticeable shift is occurring in the borrowing habits of young Indians. Increasingly, they are seeking loans not out of dire need, but to fuel their ambitions and enhance their lifestyles. This trend, driven by a digitally savvy generation, reflects a significant change in the country's credit mindset, moving "from borrowing for survival to borrowing for success".
Recent data indicates that aspiration-led borrowing is now surpassing need-based credit. The 7th edition of Home Credit India’s “How India Borrows” study supports this observation. The study, which surveyed over 3,500 borrowers aged 18–55 across 17 major Tier 1 and Tier 2 cities, highlights this evolving trend. This shift is particularly pronounced among Gen Z, Millennials, women, and residents of smaller cities, who are increasingly turning to digital platforms for faster, simpler, and more personalized loan experiences.
What are young Indians borrowing for? While smartphones and home appliances remain popular choices, accounting for 46% of recent loans, entrepreneurship is gaining significant traction. A growing number of young individuals are taking loans to start or expand their own businesses, with 25% of respondents indicating this as their primary reason for borrowing, up from 21% the previous year. Furthermore, many aspire to buy a home in the near future, showcasing a blend of economic mobility and the desire for homeownership. Specifically, 34% are borrowing to start or expand a business, and 28% are aiming to buy a home. Interestingly, men are more inclined towards business expansion (35%), while women prioritize homeownership (33%).
This ambition extends beyond entrepreneurship and property ownership. Gen Z, in particular, sees personal finance as a lifestyle choice, with their financial habits reflecting identity, convenience, and control. One in four Gen Z Indians access their first loan or credit card before the age of 22, and 36% take education loans. Their priorities include mental health, entrepreneurial pursuits, and long-term stability marked by owning a home. This generation's financial behavior is also heavily influenced by the "buy now, pay later" (BNPL) culture, although a significant portion (43%) report higher credit dependence and struggle with repayments.
The rise in digital borrowing is a key enabler of this trend. Over half (51%) of borrowers now prefer online loans, a 10 percentage point increase year-on-year. Millennials (54%) and Gen Z (50%) are the most enthusiastic adopters of digital lending platforms. Women are also increasingly active in the digital finance space, with 66% shopping online and seeking to improve their financial literacy.
This shift towards ambition-driven loans doesn't negate the importance of responsible borrowing. A significant majority (66%) of borrowers prioritize credible lenders, even if it means paying higher EMIs, demonstrating a growing understanding of credit scores, repayment value, and transparency. Moreover, half of the respondents believe that loans have helped them achieve goals that would have been difficult otherwise, with this sentiment being particularly strong in Tier 2 cities. Overall, 65% view loans as a tool for achieving key life milestones, including education, homeownership, and entrepreneurship.
However, it's important to note that easy access to credit also presents potential risks. While loans can be empowering, leading to financial independence and the fulfillment of long-term goals, over-reliance on credit, particularly among younger individuals, can lead to debt traps. Financial literacy and responsible borrowing habits are, therefore, crucial to ensure that this trend remains a positive force for individual and economic growth.
