Consumer Loans Overtake Credit Cards as Young Indians’ First Credit Product

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How Young Indians Are Entering the World of Credit

The old first-loan experience was hard to mistake. A borrower visited a branch, submitted records and waited. Now the buyer picks a smartphone, reaches checkout and sees a monthly instalment beside the full price. The application may take only a few taps.

Two-wheeler dealers offer finance at the showroom. Apps may place pay-later products near the payment button, while digital lenders provide small personal loans for rent, repairs or a shortage before payday. Each route creates a repayment obligation.

Equifax calls these borrowers Lifestyle Seekers because consumption and mobility shape much of their credit use. Fintech firms account for 68% of their entry lenders. The average initial ticket is around ₹67,000, enough to claim a large part of a first salary when the tenure is short.

The table below shows the routes that now lead young borrowers into formal credit. It keeps the focus on the first product rather than the value of the wider loan market.

A cardholder applies for a borrowing facility and later decides where to spend. With checkout finance, the purchase comes first. The offer arrives when the buyer is already close to paying, leaving less time to compare charges and repayment dates.

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How Will Checkout Credit Affect Indian Households?

Small-ticket finance can solve an immediate problem. A graduate may need a laptop before the first salary. A delivery worker can finance a scooter to begin earning, while a family can replace a failed refrigerator without emptying its savings. Formal credit can also be safer than informal borrowing at an uncertain rate.

Timely repayment gives a new borrower a payment history that may support a later application. TransUnion CIBIL’s 31 March 2026 update found that people below 35 formed 58% of first-time borrowers in the quarter ended December 2025.

The strain appears when several small commitments overlap. A ₹3,000 phone EMI, a ₹2,500 pay-later bill and a ₹4,000 personal-loan instalment remove ₹9,500 from the next salary. Food, rent and travel still need to be paid. One delayed salary can then turn an ordinary month into a repayment problem.

Cashback, instant approval and “no-cost EMI” may pull attention away from fees, taxes or the loss of a cash discount. Buyers should compare the amount received, the amount repaid and each charge in between.

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What Had Already Changed Before Consumer Loans Took The Lead?

The trend appeared earlier. TransUnion CIBIL said on 26 March 2025 that Gen Z represented 41% of first-time borrowers during the quarter ended December 2024. Yet many eligible young adults still had no formal loan or card account.

Consumer-durable finance had already become a common starting product. It linked credit to a named item, divided the price into fixed payments and completed the application while the customer shopped. Small personal loans followed through mobile apps, although they served cash needs rather than one purchase.

Credit-bureau records also made these small facilities more visible. A customer who thought of a pay-later account as a shopping feature could later find a consumer loan listed in the credit report. Questions posted by Indian users on Reddit show that some borrowers only discovered those accounts when checking their scores months or years later. That gap between the product label and the recorded loan remains one of the sharpest consumer issues in the story.

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What Do Credit Experts Want Young Borrowers To Check?

Subhankar Mishra, Interim Managing Director of Equifax India, said newer borrowers will increasingly be assessed through financial and transaction records rather than long credit histories. This can help workers with irregular income, small traders and new earners whose bank inflows may show repayment capacity.

Bhavesh Jain, Managing Director and CEO of TransUnion CIBIL, linked the rise in young first-time borrowers to wider formal credit access. Faster approval should still account for income, existing repayments and the loan’s purpose. Another loan can hurt a customer who already carries several short EMIs.

Borrowers need their own check before accepting an offer. The final payable amount, due date, processing fee, late fee and lender’s legal name should appear on that list. A comparison across lenders helps too. LoansJagat says on its personal-loan platform that it has analysed more than 1 crore loans and allows users to compare offers from over 50 banks and NBFCs. Its borrower-side guidance asks applicants to inspect processing fees and tenure before calculating the first EMI. That advice applies equally to a checkout loan.

The government’s consumer material reaches the same practical point. The Department of Consumer Affairs warns that a repayment default can appear on a credit report and hurt later loan applications. A small first loan therefore deserves the same care as a large one. If an account appears without recognition, the borrower should contact the named lender and raise a dispute instead of leaving it untouched.

Why Are Illegal Lending Apps Still A Risk?

Convenient credit has also given fraudulent operators an easier route to a borrower’s phone. A Ministry of Finance statement published by the Press Information Bureau on 21 July 2026 said MeitY had blocked 87 illegal loan-lending applications. The statement advised citizens to use official complaint channels when they encounter a suspicious app or abusive collection practice.

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Warning signs include an app that hides the lender’s legal name, demands access to contacts and photographs without a valid reason, or asks the borrower to repay into a personal account. Threats and public shaming are not normal recovery methods. A genuine credit need should not force a customer to surrender unrelated phone data.

Conclusion

Consumer loans have overtaken credit cards as the first credit product among young Lifestyle Seekers because finance now appears where shopping happens. The shift can support work, mobility and urgent household purchases. It can also make debt less visible at the exact moment a person accepts it.

The safer approach is plain. Every EMI needs a place in the monthly budget before the purchase goes through. Young borrowers should identify the lender, compare the total payable amount and keep track of every open account. A checkout button may take seconds to press. The repayment follows for months.

FAQs

1. Why Are Consumer Loans Beating Credit Cards As A First Product?

Consumer loans appear during the purchase, often with quick approval and a visible EMI. Credit cards require a separate application, so many new borrowers meet checkout finance earlier.

2. Does A Phone EMI Create A Credit Record?

Yes, when a regulated lender finances the purchase and reports the account to a credit bureau. Timely payments may support the record, while missed instalments can hurt it.

3. Is A Consumer Loan Better Than A Credit Card For A First-Time Borrower?

Neither product is automatically better. The right choice depends on cost, purpose and repayment ability. A fixed consumer loan may suit one planned purchase, while a card offers reusable credit and needs tighter spending control.

4. Does BNPL Affect The CIBIL Score?

It can. Many pay-later facilities operate through a lender and may appear as consumer loans or credit lines. The borrower should check the credit report and repay every due amount on time.

5. What Should A Young Borrower Check Before Accepting Checkout Finance?

The borrower should identify the lender, compare the full repayment with the cash price, inspect all fees, note the due date and count every existing EMI before proceeding.