Healthcare emergencies among top reasons for urban borrowing: Paisabazaar report

New Delhi: Medical emergencies have emerged as one of the leading triggers for personal loan uptake in urban India, underscoring gaps in health insurance coverage and the pressure of rising healthcare costs, according to a new consumer research report by Paisabazaar.

The report, The Personal Loan Story, found that 11% of borrowers across India availed personal loans to meet emergency healthcare and medical expenses. The share was significantly higher at 14% in Tier 1 cities, compared with 10% in Tier 2 and 8% in Tier 3 locations. The trend highlights how unexpected medical needs are increasingly being financed through unsecured credit rather than insurance or savings.

The study is based on in-depth interviews with 2,889 personal loan borrowers across 23 cities and towns, offering a granular view of borrowing triggers, decision drivers and awareness levels across regions, city tiers and age groups.

Beyond healthcare, borrowers cited day-to-day essential expenses, urgent home repairs, and weddings or celebratory events as the most common reasons for taking personal loans. The findings suggest that borrowing behaviour in India is no longer driven purely by distress. While 48% of respondents took loans for essential needs, 36% borrowed to fund aspirations such as lifestyle upgrades, and 16% used credit for business investments.

The report points to stark contrasts across city tiers. Borrowers in Tier 3 cities were 2.4 times more likely to borrow for daily needs than those in Tier 1 cities. Middle-income households emerged as the most credit-active for aspirational spending, with individuals earning between ₹7.5 lakh and ₹10 lakh annually showing the highest incidence of lifestyle-led borrowing at 40%.

Credit is also being used to fund life events. About 11% of borrowers financed weddings and celebrations through personal loans, led by Tier 1 cities where the figure rose to 14%. Notably, even among salaried individuals, 9% reported using personal loans to support family or side businesses and passion projects.

Despite the rapid growth of digital lending, offline channels continue to dominate. Only 32% of borrowers availed personal loans online. The study also flagged the rise of impulse borrowing, with 25% of respondents skipping the evaluation of alternative credit options—a tendency most pronounced among Gen Z borrowers at 31%.

Santosh Agarwal, CEO of Paisabazaar, said borrowing decisions today are shaped as much by life events, aspirations and urgency as by traditional factors such as interest rates and 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,” he said.

On customer experience, 91% of borrowers rated their post-loan experience as “good” or “very good”. Speed emerged as the strongest driver of satisfaction across both offline and online channels, followed by simplified processes and reduced paperwork.

However, the report also revealed gaps in credit literacy. While 98% of borrowers were aware of credit scores, only 7% fully understood how scores influence loan approval and pricing, pointing to the need for deeper financial education alongside expanding access to credit.