70% of iPhones, 80% of cars in India bought on loans — Finfluencer warns of rising debt trap

Indian households are running into debt like never before. Amid the festive shopping frenzy and easy access to credit, a sobering reminder from personal finance influencer Neha Nagar has sparked debate about the nation’s growing dependence on borrowing. Nagar highlighted a startling trend — 70% of iPhones in India are purchased through loans, while 80% of cars are financed via EMIs.

This rise in consumer credit reflects a deeper shift in India’s financial behaviour. As aspirations grow faster than incomes, more Indians are turning to debt to fund lifestyles rather than build assets. However, experts warn that not all loans are created equal — some can build wealth, while others quietly destroy it.

“The wealthy use loans as leverage to build assets,” as finance author Robert Kiyosaki, author of Rich Dad Poor Dad, famously says. “The poor and middle class often use them to buy liabilities.” That distinction, experts say, explains why many middle-income Indians are stuck in EMI cycles for depreciating assets like gadgets and vehicles, rather than investments that yield returns.

Good loans vs. bad loans

A good loan is one that builds value — creating assets, enhancing earning potential, or offering measurable returns. These include:

Education Loans, for quality, skill-based programs that increase long-term income potential.

Home Loans, when planned wisely, building an appreciating asset and long-term stability.

Business Loans, for expanding operations or innovation, which generate higher revenue.

Upskilling Loans, for professional certifications that enhance employability.

Such loans are considered financial multipliers, turning borrowed money into future gains. In contrast, borrowing for luxury consumption — from iPhones to holidays — adds no lasting value and often leads to a debt spiral.

As Nagar cautions, “Debt itself isn’t the enemy — ignorance is.” The key lies in distinguishing between constructive and destructive borrowing.

RBI data rings alarm

The Reserve Bank of India’s Financial Stability Report (December 2024) underscored how India’s household borrowing trend has ballooned. The household debt-to-GDP ratio nearly doubled from 26% in June 2015 to 41.9% in December 2024. Though slightly down from 42.9% six months earlier, the pace of accumulation remains concerning.

More worryingly, the composition of debt is shifting toward consumption. Non-housing retail loans, such as credit card, personal, and consumer durable loans, now form 54.9% of total household debt, while housing loans have dropped from 36–37% in FY19 to 29% in December 2024. Personal and consumption loans have grown at a compound annual rate of 20.4% between March 2021 and March 2025, reflecting a surge in borrowing for non-productive purposes.

The RBI has already sounded caution. Rising loan-to-value (LTV) ratios and exposure to sub-prime borrowers led the central bank to raise risk weights on unsecured loans to 125% in November 2023, in a bid to cool down credit expansion. Yet, per capita household debt rose from ₹3.9 lakh in March 2023 to ₹4.8 lakh by March 2025, largely driven by higher-rated urban borrowers.

Consumption-driven borrowing

While non-performing assets (NPAs) in consumer lending remain low at 1.4%, analysts warn of hidden risks as savings rates fall to a 47-year low — just 5.3% of GDP in FY23. The RBI has cautioned that while the financial system is stable for now, India’s growing reliance on credit-fueled consumption could threaten long-term growth.

In essence, the iPhone-on-EMI phenomenon is a symptom of a larger structural problem — a society financing desires faster than it builds wealth. Unless borrowing habits shift toward productive, value-creating loans, India’s consumption boom could soon turn into a debt crisis.