Urban Borrowers Increasingly Use Personal Loans to Cover Essential Living Costs
Why City Dwellers Are Turning to Personal Loans to Pay for the Basics: Medical emergencies are pushing many Indians into debt. A recent Paisabazaar report, The Personal Loan Story, shows that 11% of personal loan borrowers in India take loans for healthcare expenses. This number is higher in Tier-1 cities (14%), compared to Tier-2 (10%) and Tier-3 cities (8%), highlighting rising medical costs and low health insurance coverage.
The study, based on interviews with 2,889 borrowers across 23 cities, found that people mainly take personal loans to cover essential daily expenses, medical needs, urgent home repairs, weddings, and other immediate costs.
Some Key Findings of the Report:
-48% of borrowers took loans for essential expenses.
-36% took loans to fulfill their aspirations.
-16% took loans for business or investment.
Personal Loans for Lifestyle Expenses:
The likelihood of taking loans for everyday needs is 2.4 times higher in Tier-3 cities compared to Tier-1 cities. Besides self-employed individuals, 9% of salaried employees are also taking personal loans for family businesses, side businesses, or passion projects. The rate of taking loans for lifestyle expenses is highest (40%) among the middle class with an annual income of Rs. 7.5 to 10 lakh. 11% of borrowers took loans for weddings and other ceremonies, with this figure reaching 14% in Tier-1 cities.
Online vs. Offline Personal Loans:
Offline channels still enjoy greater trust. Despite the increasing availability of online loan platforms, only 32% of people took personal loans through online channels. Most borrowers still rely on offline channels. Another finding was that 25% of borrowers took out a loan without exploring any other options. This figure reached 31% among Gen Z.
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