Borrowing moves from need to purpose based loans, borrowers becoming more tech savvy

A new study has revealed a defining shift in Indian consumers’ purpose of borrowing, which has shifted from need-based to purpose-driven.

In 2025, the top reason for borrowing was the purchase of smartphones and home appliances, with 46% of consumers borrowing for this requirement, as per the study by Home Credit India on How India Borrows 7.0. However, 25% of borrowers seek credit for business expansion or start-ups, which was at 21% in 2024, indicating a rise in enterprise-led borrowing, the study revealed.

About 12% of respondents said they borrow for home renovation and construction as against 15% in 2024 while 4% borrowed for education loans, 2% for marriage and 4% for purchasing a vehicle.

“How India Borrows 7.0 study reflects a shift in India’s credit culture - from borrowing for survival to borrowing for success,” said Ashish Tiwari, Chief Marketing Officer, Home Credit India, noting that Gen Z, millennials, women, and smaller cities are leading the digital lending revolution, valuing speed, simplicity, and personalisation. Further, embedded finance is driving frictionless borrowing, he said.

The study found that digital adoption has become a central driver of financial empowerment and metros and rising cities are setting new benchmarks in mobile-first finance.

As many as 65% of borrowers now use mobile banking which highlights a growing comfort with digital transactions, it said. Mobile banking adoption is led by metros (71%) and the South region (68%). Among cities, Delhi NCR (83%), Kochi (74%), and Chennai (73%) are clear frontrunners, while emerging markets like Bhopal and Chandigarh are at 54%. Within demographic segments, millennials (67%) and Gen Z (64%) are the most active users of mobile banking.

In terms of where they shop from, the study found that 57% of borrowers shop online, with women (66%) surpassing men (55%).

Gen Z (65%) also leads online adoption, followed by millennials (59%), while Gen X (48%) continues to rely on traditional methods, showing a generational shift in digital comfort. Regionally, the East (70%) leads digital commerce, driven by cities like Kolkata (74%) and Patna (68%), followed by the North (57%), West (53%), and South (51%), it found.

The study also highlighted that modern borrowers are becoming more analytical, value-conscious, and trust-driven. Borrowing decisions are made based on affordability, speed, and credibility.

Before taking a loan, nearly half (46%) assess EMI feasibility, while 33% consult friends or family, and 31% review their credit scores. Interest rates and total repayment value (46%), quick disbursal (38%), and flexible closure options (37%) remain the top product considerations, it found.