Kamal Ghorui
Healthcare emergencies have emerged as one of the leading reasons for personal loan borrowing in urban India, highlighting gaps in health insurance coverage and rising medical costs, according to a new consumer research report released by Paisabazaar.The study, titled The Personal Loan Story, found that 11% of personal loan borrowers nationwide took credit to meet emergency healthcare and medical expenses. The dependence is sharper in metros, with 14% of Tier 1 borrowers citing medical needs as the primary trigger, compared with 10% in Tier 2 cities and 8% in Tier 3 locations, the report said.The findings are based on in-depth interviews with 2,889 personal loan borrowers across 23 cities and towns, covering borrowing triggers, decision-making behaviour, channel preferences and credit awareness across regions, city tiers and age groups, the study claimed.Alongside healthcare, borrowers reported essential day-to-day expenses, urgent home repairs, and weddings or celebratory events as the most common reasons for availing personal loans. Overall, borrowing is no longer driven solely by distress, the study noted. About 48% of borrowers took loans for essential needs, while 36% borrowed to fund aspirations such as lifestyle upgrades, and 16% used personal loans for business investments.The data also showed stark regional contrasts. Borrowers in Tier 3 cities were 2.4 times more likely to borrow for daily needs compared with those in Tier 1 cities. Middle-income earners — particularly those with annual incomes between Rs 7.5 lakh and Rs 10 lakh — emerged as the most credit-active segment for aspiration-led borrowing, with 40% using personal loans for lifestyle-related spending.While self-employed individuals continue to borrow for business investments, the report found that 9% of salaried borrowers are also using personal loans to fund family businesses, side ventures or passion projects. Credit is increasingly being used to finance life events, with 11% of borrowers taking loans for weddings and celebrations, led again by Tier 1 cities at 14%.Despite the rapid growth of digital lending, offline channels remain significant. Only 32% of borrowers availed personal loans online, the study said. At the same time, impulse borrowing is becoming more common, with 25% of borrowers not evaluating alternative credit options before taking a loan — a trend most pronounced among Gen Z borrowers, where the figure rises to 31%.Commenting on the findings, Santosh Agarwal, CEO of Paisabazaar, said borrowing decisions are increasingly shaped by urgency, aspirations and life events rather than just interest rates or eligibility. “As consumer behaviour evolves rapidly, it is becoming increasingly important for the ecosystem to understand these shifts and enable responsible, transparent and inclusive credit delivery,” she said.The study also pointed to high satisfaction levels, with 91% of borrowers rating their post-purchase experience as “good” or “very good”. Speed emerged as the strongest driver of satisfaction across both offline (58%) and online (57%) channels, followed by simplified processes and reduced paperwork.However, the report flagged gaps in credit literacy. While 98% of respondents said they were aware of credit scores, only 7% fully understood how scores affect loan approval and pricing, underscoring the need for deeper financial education as credit penetration expands.
