Summary of this article
Borrowers shift to aspiration-led credit for upgrades.
Digital habits rise with stronger online loan preference.
Affordability checks and lender trust shape borrowing choices.
Borrowings in the country are now more closely tied to progress, stability, and long-term planning than to immediate survival needs. The How India Borrows study by Home Credit India has highlighted how borrowers, including those from lower and middle-income groups, are becoming more thoughtful in using credit, as supported by higher digital participation and rising awareness of affordability and lender credibility.
The report focuses on four themes explaining this shift: aspiration-led borrowing pattern, digital adoption, informed choices, and emerging forms of credit. Together, they reveal a consumer base that is increasingly becoming structured in the way it approaches loans.
Borrowing Shifts Toward Improvement and Income Growth
The study shows that 46 per cent borrow for smartphones and home appliances, making it the largest category. This also reflects the continuing importance of digital access and household upgrades. Business expansion or start-ups now account for 25 per cent from 21 per cent last year, pointing to a rising interest in income growth and micro-entrepreneurship.
Other categories include home renovation at 12 per cent, education at 4 per cent, marriage at 2 per cent and vehicle purchases at 4 per cent. The short-term goals follow a similar pattern, with 34 per cent planning to borrow for business activity and 28 per cent for home ownership.
Digital Use Rises Across Services
Digital finance habits have grown stronger. Mobile banking is used by 65 per cent of the borrowers, showing an increasing rate of adoption.
Online purchasing stands at 57 per cent, led by women at 66 per cent while the eastern states are the most active. Internet banking is used by 46 per cent, primarily by younger borrowers in metro cities.
Financial literacy is becoming a priority. Around 57 per cent intend to improve their knowledge about money management, interest rates, equated monthly instalments (EMIs) and credit scores through trusted channels.
Affordability and Trust on Top
Affordability remains a key filter. About 46 per cent check EMI feasibility before applying for loans. Nearly one-third check their credit score and compare interest rates, while another 33 per cent speak to family or friends before borrowing.
Credibility of the lender is a key factor. Two-thirds seek credible lenders even if the EMI is marginally higher. Borrowers from Bhopal, Kolkata, and Patna are most aware of EMI, while borrowers in Chennai rely more on personal networks.
Online Borrowing Becomes More Common
Digital loans keep on growing. About 51 per cent now prefer online loan applications compared with 41 per cent last year. This makes online channels more widely used than point of sale credit or bank visits. Tier 1 cities lead this shift, with the northern states showing 59 per cent preference for digital loans.
Among cities, Pune, Ludhiana, Chandigarh, Bengaluru, and some others report some of the highest levels of digital borrowings.
Embedded Finance Shows Rising Interest
About 49 per cent show interest in embedded finance, where credit is extended right inside digital platforms. Chennai, Bengaluru, Hyderabad, Ranchi, Patna, and Kolkata show a high level of interest in this concept. EMI cards continue to be widely used at 65 per cent.
Though the expectation for transparency is growing in large and mid-sized cities, where digital activity is growing, only 23 per cent fully understand the rules about data privacy.
