New Delhi: Personal loans are fast becoming a default financial tool for households in Delhi and the National Capital Region, driven by rising medical expenses, costly social obligations and easy access to unsecured credit, a new nationwide consumer study has found.
The study, conducted by Paisabazaar across 23 cities of India including Delhi NCR, shows that borrowers in Tier 1 cities such as Delhi are significantly more likely to take personal loans for healthcare expenses and large celebrations compared to smaller towns, signalling growing financial pressure even among urban middle-income families.
According to the findings, 14% of personal loan borrowers in Tier 1 cities cited medical treatment as the primary reason for borrowing, the highest among all city categories. Nationally, the figure stands at 11%.
Healthcare costs hit urban households hardest
The data highlights healthcare as one of the biggest stress points for Delhi households. Despite better access to hospitals and insurance coverage compared to smaller towns, rising treatment costs and insufficient insurance limits are pushing families towards unsecured loans.
Medical inflation in India currently ranges between 12% and 15% annually, and nearly 40% of healthcare spending still comes directly from patients’ pockets. In a city like Delhi, where private healthcare dominates and costs are significantly higher, this gap is increasingly being bridged through personal loans.
The study notes that even insured households are forced to borrow when hospital bills exceed coverage limits, turning medical emergencies into long-term financial liabilities.
Sharing a similar experience, a 36-year-old borrower from Ludhiana said sudden hospitalisation can leave families with few immediate options. “My father was suddenly admitted to the hospital, and the responsibility of arranging funds fell on me during a very difficult time for our family. A personal loan helped me manage the medical expenses on time and focus on his recovery,” he said.
Weddings and social pressure drive borrowing
Alongside healthcare, social spending has emerged as a major trigger for borrowing in Delhi. About 14% of Tier 1 borrowers said they took personal loans to fund weddings or large family celebrations, compared to 10% in Tier 2 cities and 7% in Tier 3 towns.
The findings reflect the growing cost of weddings in urban India, where venue charges, catering, jewellery and social expectations have escalated sharply. Easy access to credit has normalised borrowing for celebrations that were earlier financed through savings or family support.
Essentials still account for bulk of borrowing
Despite the rise in lifestyle-led borrowing, necessity remains the dominant driver. Nearly half of all borrowers nationally, including in Delhi, reported taking personal loans to cover essential expenses such as household costs, education, emergency vehicle repairs and home maintenance.
However, the report highlights a key contrast. While borrowers in smaller towns rely on loans for basic survival, urban borrowers increasingly use credit to manage cash flow gaps caused by high living costs and uneven income growth.
Middle-income Delhi households lead aspirational credit use
Borrowers earning between ₹7.5 lakh and ₹10 lakh annually emerged as the most credit-active for lifestyle spending. In Delhi, this income group forms a large share of the salaried workforce, particularly in private sector jobs.
The study found that nearly 40% of salaried borrowers used personal loans for non-essential or aspirational expenses, including home renovation, vehicle upgrades and celebrations. For many, personal loans act as a bridge between rising aspirations and limited savings.
NBFCs dominate Delhi’s personal loan market
Non-banking financial companies have emerged as the preferred lenders for personal loans in Delhi, chosen by 44% of borrowers nationally and particularly favoured for smaller loan amounts below ₹2 lakh.
Faster approvals, minimal documentation and flexible eligibility criteria have helped NBFCs outpace banks, especially among younger and self-employed borrowers. Private sector banks accounted for 28% of borrowers, while public sector banks lagged at 22%.
Speed outweighs scrutiny, especially among youth
The study raises concerns about impulse borrowing in urban centres like Delhi. One in four borrowers admitted they did not explore alternative credit options before taking a personal loan.
Among Gen Z borrowers, the share rose to 31%, with speed, easy availability and pre-approved offers ranking higher than interest rates as decision factors. The trend is particularly relevant in Delhi, where digital lending apps and instant credit offers are widely marketed.
Offline channels still preferred
Despite Delhi’s high digital penetration, 68% of borrowers still availed personal loans through offline channels such as bank branches, NBFC offices or relationship managers.
Fear of cyber fraud, discomfort with online processes and a preference for face-to-face interaction were cited as key reasons for avoiding digital-only lending platforms, even among borrowers who compared loan options online.
Strong repayment, weak credit understanding
On the positive side, repayment discipline among Delhi borrowers remains strong. More than 90% of respondents said they had never missed an EMI. However, the study flags a serious gap in credit understanding.
While nearly all borrowers were aware of credit scores, only a small fraction understood how scores affect loan eligibility and interest rates. This lack of understanding often leads to multiple loan applications and over-borrowing, which can weaken long-term credit health.
Why Delhi should worry
The findings come amid growing regulatory scrutiny of unsecured lending and aggressive expansion by lenders in urban markets. For Delhi, the data points to a deeper issue: personal loans are increasingly being used not just to absorb financial shocks, but to manage the high cost of living and social expectations.
Santosh Agarwal, CEO of Paisabazaar, said borrowing patterns are undergoing a fundamental shift. “Borrowing decisions today are shaped as much by life events, aspirations and urgency as by interest rates or eligibility. This study is our effort to move beyond transactional data and better understand the motivation and behaviour behind borrower decisions. 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.
As unsecured credit becomes easier to access, the study suggests the real risk lies not in defaults, but in households silently accumulating debt to maintain urban lifestyles.
