Consumer loan trends: Borrowing for smartphones skyrockets to 37% in 2024

Borrowing for smartphones and home appliances has skyrocketed to 37% in 2024, a massive leap from just 1% in 2020, revealed a study titled  latest study 'How India Borrows 2024' by Home Credit India.  

Whether it’s the latest smartphone or a shiny new washing machine, Indian consumers are keen to upgrade their lives! According to the study, most of the loans were taken to purchase consumer durables, followed by lending for business and house renovation. Borrowing for business expansion and start-ups jumped from 5% in 2020 to 21% in 2024, fuelling a sustained entrepreneurial momentum as individuals sought new income streams and opportunities, driven by pandemic-related economic shifts and strong government support for MSMEs through credit schemes and subsidies, noted the study. 

 

How about those renovation projects? Loans for home improvements grew from 9% in 2022 to 15% in 2024. It seems like everyone is sprucing up their spaces to create their dream homes. 

Medical emergencies
Interestingly, borrowing for medical emergencies dropped to 3% from 7% in 2020. Could it be that improved financial planning and better access to healthcare are paying off? 

The study further showed stable trends in education loans, which remained at 4% from 2022 to 2024, underscoring the continued importance of children’s education. 

Borrowing for marriages gradually increased from 3% in 2021 to 5% in 2024, highlighting the continued cultural importance of fulfilling social commitments.

The How India Borrows 2024 study was conducted across 17 cities including Delhi-NCR, Mumbai, Kolkata, Chennai, Bengaluru, Hyderabad, Pune, Ahmedabad, Lucknow, Jaipur, Bhopal, Patna, Ranchi, Chandigarh, Ludhiana, Kochi, and Dehradun. The sample size consisted of approximately 2500 borrowers in the age group of 18-55 years, with an average income of Rs 31,000 per month.

Rise in Digital Financial Transactions

The study indicated that as consumers become more tech-savvy, their borrowing habits are also shifting towards app-based banking, with 65% favouring it over browser-based banking (44%) in 2024. This trend reflects the consumers' growing preference for convenience, 24/7 financial access over traditional branch visits, and heightened digital literacy. App-based banking is most popular among Millennials (69%), followed by Gen Z (65%) and Gen X (58%). Geographically, Metros lead with 71% adoption, followed by Tier 2 cities at 69%. Browser-based banking, meanwhile, sees higher usage among Gen Z and Millennials at 47% each, with Gen X having the lowest usage at 35

Online shopping has also shown a pattern of normalisation following the peak disruptions caused by the COVID-19 pandemic. In 2021, usage of online shopping hit 69% due to health and safety concerns but dropped to 48% in 2023 as restrictions eased. By 2024, it has slightly rebounded to 53%. Women (60%), Millennials (59%), Gen Z (58%), Metros and Tier 2 cities (56% each) now drive this trend. Kolkata (71%), Kochi (66%), Hyderabad (64%), Chennai (60%), and Ranchi (59%) are the top five cities in terms of online shoppers.

Increased Usage of Chatbots and WhatsApp

As per the study, Chatbots are gaining traction in customer service, with 27% of middle-class borrowers citing familiarity with the tool, up 4% from last year. Awareness is stronger among Gen Z at 30%. Additionally, 38% of borrowers find chatbots easy to use for customer service, and 29% trust the responses provided by them.

Driven by their convenience in credit-related transactions, the adoption of innovative financial solutions, like embedded finance and EMI cards, is on the rise.  Almost 50% of the borrowers in favour of embedded finance agree that embedded finance makes borrowing faster and e-commerce shopping simpler. For example, 64% favoured major e-commerce platforms (like Amazon, Flipkart, Meesho, etc), followed by 21% opting for travel apps (like MakeMyTrip, ClearTrip, etc), and 23% using food delivery apps (like Zomato, Swiggy, etc).

According to the study, interest in embedded finance is notably higher among Gen Z (55%) and Men (45%), highlighting a demographic divide in engagement. Additionally, customers in Tier 1 cities, particularly in urban centers, such as Lucknow (68%), Patna (53%), Ahmedabad (52%), Bhopal (52%), and Ranchi (52%), exhibited a greater propensity towards embedded finance.

EMI Cards remained the most popular credit tool among the lower-middle-class borrowers in India, with 43% citing them as their preferred option due to greater trust and faster disbursals. Other popular sources for obtaining loans include credit cards, preferred by 24% of borrowers, and digital lending apps, preferred by 12%.

Borrowing preferences differ notably by region. In Tier 1 and Tier 2 cities like Kochi (85%), Lucknow (73%), and Ranchi (69%), borrowers prefer physical branches, indicating that people value personal interaction and trust. Meanwhile, borrowers in metropolitan cities such as Bengaluru (64%), Hyderabad (53%), and Chennai (48%) increasingly lean towards online channels due to accessibility and tech familiarity, reflecting their openness to digital financial services.

Awareness of Data Privacy

At least 24% of borrowers have claimed to have heard of the data privacy requirements that lending companies must implement, an 8% increase from last year, but this understanding is superficial as their knowledge on the subject is negligible.  

Nearly half (48%) of the lower-middle-class borrowers don’t understand anything about  data protection guidelines, highlighting the need for increased transparency and education from financial institutions and regulators.

In terms of comprehension of the data protection rules and guidelines, approximately 40% of borrowers claim to understand, with 38% recognising that these guidelines prohibit unauthorised data sharing. Borrowers from Kochi (49%) and Chennai (43%) seem to be more digitally advanced and claim to understand the usage of personal data. However, only 15% of borrowers are aware that these guidelines specifically pertain to the use of their data exclusively for the loan application process, a 3% increase compared to last year.

The study also found that about 58% of borrowers are concerned about how their personal data is collected and used by lending apps. Almost half of the borrowers (57%) voiced that they don’t have any control over their personal data with the lending apps, and 49% of the borrowers feel that the lending apps collect more data than required. Although less than one-fourth (23%) of the borrowers understand the usage of their personal data by lending apps, a strong demand for transparency exists as more than three-fourths (76%) of borrowers seek clarity on the usage of their personal data. Tier 1 (87%), Gen Z (80%), and Men (78%) are particularly interested in learning about the use of their personal data.

 Need for Financial Literacy

Another 15% of borrowers reported needing assistance while using internet banking, loan applications, payment wallets, and other critical online financial tasks, indicating that a notable portion of users, especially Women (17%), Gen X (24%) and borrowers in Tier 1 cities (18%), still encounter challenges or lack confidence in managing their financial activities digitally.