In India's rapidly changing financial ecosystem, personal loans have transitioned from being a last-resort option for emergencies to a commonplace tool for managing both necessities and lifestyle aspirations. This shift is particularly evident among middle and lower-middle-income households, where borrowing helps bridge cash flow gaps amid rising costs. Data from RupeeRedee, a digital lending platform, provides a snapshot of these evolving patterns, revealing how Indians are increasingly relying on short-term credit for a mix of critical and discretionary needs.
Growing trend of personal loans for both necessity and aspirational spending
According to RupeeRedee's analysis from the loan disbursals between January 2025 to July 2025, a striking revelation is that nearly half — 47.80 percent — of loan requests stem from lifestyle-oriented needs, including rent, shopping, home renovations, travel, and gifting. This indicates a broader cultural shift toward using credit for everyday flexibility rather than just survival.
As Artem Andreev, Director of RupeeRedee, notes, "The borrowing trend highlights the growing dependence on personal loans to manage critical and lifestyle-driven expenses, which further reflects a shift in borrowing behaviour."
Then follows borrowing for medical emergencies, accounting for 20.38 percent of all personal loan requests. With hospitalization costs soaring and insurance often falling short, individuals turn to loans for immediate relief. Family-related expenses, such as weddings, functions, and festivals, follow closely at 13.16 percent. Household expenses drive 12.35 percent of demands, while loans for education purposes make up 6.31 percent, highlighting the need to pay rising school fees, coaching fees and skill-building programs.
This data paints a picture of Indian families depending on personal loans from the fintech platforms to navigate income volatility and aspirational spending.
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Fintech loan data shows varied ticket sizes for different needs
Delving into financial specifics, the average ticket size for loans varies by category, reflecting the scale of needs. Medical loans average Rs 15,800, with some high-value disbursals exceeding Rs 1 lakh to cover unforeseen health crises. Education loans average Rs 16,800, peaking between Rs 55,000 and Rs 75,000 for fees and exams. For marriages and festivals, the average is Rs 15,300, with peaks at Rs 90,000 to Rs 95,000, capturing the extravagant nature of these occasions. Household expense loans average Rs 17,500, often reaching Rs 90,000 to Rs 95,000 for utilities and essentials, showing a reliance on credit for routine financial management.
According to the study, overall personal loan applications rose significantly, boosted by easier access through digital platforms. This growth signals increasing consumer comfort with fintech, which offers quick approvals and minimal paperwork compared to traditional banks.
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Drawbacks of personal loans
While personal loans offer convenience, they come with significant drawbacks that can exacerbate financial strain, especially in economic landscape marked by inflation, job instability, and uneven income growth.
First, high interest rates — often 10-36 percent annually for unsecured loans — make repayment burdensome. Then, multiple personal loans can snowball into debt traps due to compounding interest and fees. Late payments attract penalties, further inflating costs.
Second, over-reliance on loans erodes financial discipline. The RupeeRedee data shows 47.80 percent borrowing for lifestyle needs, which can lead to impulsive spending and perpetual cycles of debt. In a country with low savings rates and high inflation cycle, this diverts funds from building emergency funds or investments, leaving families vulnerable to shocks like job loss or medical issues.
Third, personal loans impact credit scores. Frequent borrowing or defaults can lower your credit scores, making future loans costlier or inaccessible.
Finally, cultural and social pressures amplify risks. Expenses like weddings (13.16 percent of loans) often stem from societal expectations, leading to unnecessary debt on the newly wedded couples.
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