What is the story about?
Medical emergencies, daily essentials and life events are among the most common reasons Indians take personal loans, according to a consumer research study by Paisabazaar.
The study, titled “The Personal Loan Story”, shows that 11% of personal loan borrowers in India borrowed to meet emergency healthcare and medical expenses. The proportion rises to 14% in Tier 1 cities, compared with 10% in Tier 2 and 8% in Tier 3 locations, pointing to the role of rising medical costs and limited health insurance coverage.
Beyond healthcare, the survey found that borrowing is spread across essential and aspirational needs. Nearly half of borrowers (48%) took personal loans to meet essential expenses such as household needs and urgent home repairs, while 36% borrowed for aspirational purposes, including lifestyle upgrades. Business-related borrowing accounted for 16% of loans.
City-tier trends show sharper dependence on credit for essentials outside large metros. Borrowers in Tier 3 cities were 2.4 times more likely to take personal loans for day-to-day needs than those in Tier 1 cities.
Life events also featured prominently. About 11% of borrowers financed weddings and celebrations through personal loans, with Tier 1 cities leading at 14%. The survey further found that salaried individuals are increasingly using personal loans to fund family or side businesses, accounting for 9% of such borrowing.
The report highlights shifting borrowing behaviour, with 25% of borrowers not evaluating alternative credit options before taking a loan. This tendency was highest among Gen Z borrowers at 31%. Despite the expansion of digital lending platforms, only 32% of borrowers availed personal loans online, with many continuing to rely on offline channels.
In terms of awareness, while 98% of respondents said they were familiar with credit scores, only 7% fully understood how credit scores affect loan approval and pricing.
The study is based on in-depth interviews with 2,889 personal loan borrowers across 23 cities and towns in India.
The study, titled “The Personal Loan Story”, shows that 11% of personal loan borrowers in India borrowed to meet emergency healthcare and medical expenses. The proportion rises to 14% in Tier 1 cities, compared with 10% in Tier 2 and 8% in Tier 3 locations, pointing to the role of rising medical costs and limited health insurance coverage.
Beyond healthcare, the survey found that borrowing is spread across essential and aspirational needs. Nearly half of borrowers (48%) took personal loans to meet essential expenses such as household needs and urgent home repairs, while 36% borrowed for aspirational purposes, including lifestyle upgrades. Business-related borrowing accounted for 16% of loans.
City-tier trends show sharper dependence on credit for essentials outside large metros. Borrowers in Tier 3 cities were 2.4 times more likely to take personal loans for day-to-day needs than those in Tier 1 cities.
Life events also featured prominently. About 11% of borrowers financed weddings and celebrations through personal loans, with Tier 1 cities leading at 14%. The survey further found that salaried individuals are increasingly using personal loans to fund family or side businesses, accounting for 9% of such borrowing.
The report highlights shifting borrowing behaviour, with 25% of borrowers not evaluating alternative credit options before taking a loan. This tendency was highest among Gen Z borrowers at 31%. Despite the expansion of digital lending platforms, only 32% of borrowers availed personal loans online, with many continuing to rely on offline channels.
In terms of awareness, while 98% of respondents said they were familiar with credit scores, only 7% fully understood how credit scores affect loan approval and pricing.
The study is based on in-depth interviews with 2,889 personal loan borrowers across 23 cities and towns in India.
