53% opt for personal loan even before 30, Bengaluru most credit healthy city

Indians manage more than three credit accounts in their late 20s and the average age of a first salaried credit card user in India is 28 years, while that for a self-employed one is 30, revealed a study by Paisabazaar. 

The study analysed credit data of 3.7 crore consumers across India. 

The average age when consumers took their first credit card was 28, while the average age for the first personal loan and the consumer durable loan was 29. On the other hand,  home loans, which are life-goal-based and usually of high ticket size, are consumed at a later stage, at an average age of 33.

A whopping 53% of Indians took their first personal loan before reaching the age of 30, and  22% of the personal loan consumers were under the age of 25. Similarly, 57% took their first credit card before turning 30. 24% availed a credit card even before the age of 25.

"Over half of the consumers took their first personal loan or credit card before they turned 30, whereas only 31% of them took their first home loan before 30, and, expectedly, a small ratio of only 8% took it before 25. Moreover, 45% of first-time home loan borrowers were between the ages of 30 and 40," revealed the study.

The study also analysed the credit health of consumers from the top 10 cities and found Bengaluru to be the most credit-healthy city  (Healthy credit score taken as 770+) in India, followed by Ahmedabad, Mumbai, Pune, Chennai, and Delhi. Hyderabad, Kolkata, Surat, and Coimbatore were other cities in India’s 10 most credit-healthy cities.

There has also been a sharp rise in younger consumers checking credit scores.In FY19, 14% of individuals who checked their credit scores on the Paisabazaar platform were under the age of 30, and 52% were in the 30-40 age group. By FY23, a noteworthy 38% of Paisabazaar's new credit score consumers were under the age of 30, including 17% who were under 25, and less than 30% were in the 30-40 age group.

With rising awareness and ease of access, a large number of consumers are using credit for varied needs and from an early age. The study found that 64%  acquired their first credit product before they turned 30. Among these, a notable 37% were under 25. Only 23% of consumers accessed credit for the first time between 30 and 40 years of age, while another 13% used credit after turning 40. Over 20% of consumers took their first personal loan and credit card before turning 25.

It was further revealed that 41% of salaried consumers took their first credit product before turning 25, while 34% of self-employed consumers took their first credit product under the same age. This indicates that young salaried consumers are becoming more credit savvy. The proportion of both salaried and self-employed consumers decreased over the age of 40, as only 8% of salaried and 14% of self-employed consumers took their first credit product.

A recent survey by Paisabazaar also showed that 1 in 5 personal loans taken today is used for holiday-related expenses. Of all the survey participants, 21% who availed personal loans from the Paisabazaar platform between January 1, 2023, and June 30, 2023, used them for holiday-related expenses such as flight tickets, hotel bookings, and some miscellaneous spending like vacation shopping, etc.

This shift is also evident in the number of credit accounts held by each.  25% of consumers who checked their credit score on Paisabazaar currently hold 5 or more active credit accounts. Another 46% have 2 to 4 active credit accounts, while 29% have only 1 active account.

Among individuals under the age of 25, the average number of credit accounts stands at 2.3, indicating a relatively modest credit portfolio. As individuals progress into their late 20s and early 30s, there is a noticeable increase in credit activity, with an average of 3.1 credit accounts. A significant uptick in credit usage becomes apparent among those aged 30 to 35, where the average number of active credit accounts rises to 3.7. This further rises to a peak of 3.9 accounts when consumers reach their late 30s (35-40 age group), and it continues well into the 50s.

47% of consumers with over 5 credit accounts are between 30 & 40 years.  Interestingly, even younger consumers below the age of 30 demonstrate a consistent pattern of regular credit usage, with 18% of the demographic managing over 5 credit accounts.

Most popular credit basked: 2 credit cards, one personal loan

Under the age of 25, credit cards were the most popular choice, with the majority opting for two credit cards, underscoring the growing popularity and increased awareness around the benefits of credit cards among young professionals.

The age group of 25 to 30 witnesses a subtle shift, with consumers seeking a blend of convenience and financial support. Here, the combination of 1 credit card and 1 personal loan emerges as the preferred choice.

Among the consumers in their early 30s, 2 credit cards and 1 personal loan were the most popular combinations.

Salaried more credit healthy than self employed
 

While over 25% of salaried consumers have an excellent credit score of 770 and above, only 14% of self-employed had a strong credit profile. Both segments had 32% of consumers who had a good credit score.

"The contrast revealing a higher share of credit-damaged consumers among the self-employed segment could be easily seen with 30% having a poor credit score in comparison to 22% of salaried consumers," noted the study.

Moreover, 24% of consumers from top metro cities have a strong credit score. This is only slightly higher than non-metros, where 22% of consumers have a strong credit score, signifying parity in credit behaviour between metro and non-metro consumers.

Women are more inclined towards personal loans, and men  prefer credit cards

Men and women have similar  credit health 

Paisabazaar found no difference in the credit health of male and female consumers. 20% of its male consumers have a healthy credit score, compared to 19% of the female consumers who have a strong credit score. However, 88% of its consumer base comprises males with only 12% representing women.

Women consumers were found to be more inclined towards home loan and consumer durable loans