A shocking report has come out on the expenses of Young Indians. According to this report, the income of today’s Gen Z is increasing rapidly but the expenses are many times more than that. Especially the loan amount. According to the report, if a Gen Z is earning Rs 30 thousand per month then he has a loan of Rs 40 lakh. Especially this trend is being seen in big cities like Bangalore, Delhi, Mumbai. The reports of CIBIL and Unified Fintech Forum are also indicating something similar. It is clearly stated in the report of both of them that Jane ji is rapidly getting trapped in the debt trap. Let us try to understand with some examples how the people of the country are getting trapped in the debt trap. Also, what kind of information is given in CIBIL and UFF reports?
understand with example
Vidyut Sharma of Pune has been mentioned in the ET report. Who incurred a huge debt within a few years. When Vidyut Sharma decided to do freelance photography in 2016, at the age of 19, he had no idea that he was going to get trapped in debt. The process of taking loan to buy or repair photography equipment, which started with a small loan, turned into a loan of about Rs 40 lakh spread across 54 loan accounts in 4-5 years. Most of these were small, unsecured loans taken from fintech apps, non-banking financial companies (NBFCs), credit card issuing companies and banks.
The entrepreneur says in the report that it started around 2021, when I realized that I didn’t need my money to buy expensive gear. I was getting lots of offers for personal, instant loans without any guarantee or complicated process. But I had not anticipated such bad consequences of missing EMI. Tired of receiving 15-20 calls every day and loan sharks visiting him and his relatives at his home, he decided to approach Expert Panel, a debt counseling firm, last year. Sharma says in the report that he not only helped in ending the problem but also reduced my debt to about Rs 5 lakh.
Sharma is also no different. Every month, hundreds of youth aged 25-35 years are enrolling in debt resolution firms to avoid serious financial crisis. Zoomers, born between 1997 and 2012, are the first generation to have taken such a huge loan, which is completely different from previous generations for whom taking loans was prohibited. He is taking a loan of Rs 30 to 40 lakh on a monthly salary of Rs 30,000 to 40,000. Behind every debt trap is an attempt to bridge the gap between income and expenditure, which soon goes out of control.
For most people, this cycle does not start with a secured loan to buy a big item like a house or a car, but with smaller, unsecured loans for essentials, lifestyle upgrades, gadgets, travel or career advancement. These are easily available, appear to be harmless, and are easily processed. When the income cannot cover the increasing EMIs, the situation becomes worse by taking more loans to repay the existing loan or missed installments.
shocking report
According to a report by CIBIL, Gen Z comprises 41% of new credit taking consumers. According to another report by CRIF High Mark and Unified Fintech Forum (UFF), by June 2025, more than 65 percent of loan takers from NBFC fintech are in the age group of 26-35 years. Even though this generation is increasing consumption, it is lagging behind in loan repayment. According to CRIFF-UFF data, about 26 percent of these loans are outstanding for more than 90 days.
This is a confirmation of the Financial Stability Report 2025 of the Reserve Bank of India (RBI), which claimed that stressed assets (overdue 31-180 days) in the microfinance sector had increased from 4.3 percent in September 2024 to 6.2 percent in March 2025. Are these figures exaggerated?
Anurag Mehra, founder of the expert panel, says in the ET report that no, I do not think that these have been exaggerated. They say that most youth of this age are spending more money than they can afford, and even if they do not fall into the debt trap, they are always on the brink of debt, living from one salary to the next, and at the end of the month they are left with nothing.
Why is Gen Z trapped in debt?
One reason why a large number of youth have fallen into this trap is the unique combination of social, economic, technological and psychological forces in recent years. Ritesh Srivastava, founder and CEO of FREED, a Gurugram-based loan settlement and debt relief company, says in the report that debt is no longer considered bad, and we as a society have become accustomed to it.
technological
easy access to credit
Technological advancements have made instant credit easily available through multiple channels at the click of a phone tab. Harshvardhan Masta, Head of Payments, Policybazaar, says that with the rise of fintech and digital lending, it is now easier than ever to survive on credit and get trapped in a never-ending cycle of debt.
Srivastava says there has been a rapid increase in credit modes, be it credit card EMI, mobile app loan, credit on UPI, buy now pay later (BNPL) loan, or pay day loan. NBFC, MFI and fintech apps have grown rapidly in the last few years, making it easier to get small-ticket unsecured loans ranging from Rs 10,000 to Rs 2 lakh without any collateral or paperwork.
However, no one talks about the high annual percentage rate (APR, or annual cost of borrowing), which can typically range from 18-48 per cent, or the consequences of missing an EMI. Paying the minimum due amount on a credit card means that you pay 3-4 percent every month on the unpaid amount, which causes the loan to grow exponentially before you can repay it. If you miss an EMI, debt collectors come to your home, office or even your relatives’ homes, although it is illegal to harass the defaulter.
Speaking to ET, Shilpa Bhaskar Gole, Principal Officer and Designated Partner, NerdyBird Wealth Advisory, says that for many young salaried clients in the age group of 25-30 years who have a lot of outstanding debt, a common reason is easy access to credit cards. They have 8-9 cards with which they keep rotating the loans.
Mehra says that people trapped in debt keep rotating loans or take multiple loans. Banking and financial services industries should stop giving them credit at the initial stage, but they do not do so because their focus is on increasing revenue. Therefore, more loans are given to people than their repayment capacity.
income vs expenses
Rapid inflation and rising expenses along with increasing lifestyle expenses have reduced the monthly salary to a great extent, due to which the youth have no balance in their accounts at the end of the month, no savings, and no scope left for their necessary expenses. They make up this shortfall with small, high-interest loans. According to a 2025 study by Deal, a global payroll and human resources platform, two in five (41 percent) Gen Z white-collar workers are unhappy with their salaries because of rising financial pressures, 14 percent because the salary is not enough to meet their needs beyond basic expenses, and 21 percent cite the lack of increase in line with inflation. Srivastava asks that the expectations of Generation Z are not in line with salary growth, which is stagnant at 10-11 percent, while inflation is at 7-8 percent. How will they pay EMIs at 20-30 per cent APR?
social
Social media, peer pressure
The increase in consumption and leisure spending among zoomers due to social media is another reason for the rapid increase in debt. Gole says that there is such comparison between peers on social media which was not there for previous generations. They push you to live a certain lifestyle, and the gadgets, mobiles, laptops and cars you have become very important. There is also a lot of expenditure due to travel reels and goals. According to Paisabazaar’s 2025 survey of 5,700 people, 27 per cent of personal loans were taken for travel, especially in tier 2/3 cities (71 per cent), with the majority taking loans in the range of Rs 50,000-5 lakh.
psychological
atmosphere and thinking
Mehra says in the report that due to the basic financial comfort level in the middle class, Gen Z has a casual attitude towards jobs and this attitude also impacts money and spending habits. They want instant gratification and live in the moment, believing that they can earn quickly and pay off the debt, but the debt grows faster than they can pay it off.
how to avoid traps
good debt vs bad debt
Srivastava says in the ET report that the biggest thing of concern is that 55 percent of our household loans are unsecured loans. We are not taking loans to create assets. A good loan is one that allows you to build assets or a career, or increase your wealth in the future, while a bad loan simply wipes away your hard-earned money. Learn to differentiate between the two and avoid small, unsecured loans, using them only as a last resort.
create a buffer
While jobs are under threat from Artificial Intelligence (AI), any financial emergency or loss of income can blow your budget, especially if you are barely making ends meet, making it difficult to repay your loans. It is best to have an emergency fund to meet any financial shortfall or shortfall in loan repayment. Masta says in media reports that creating an emergency fund to help deal with emergencies can avoid taking further loans.
Pay attention to these red flags
You pay minimum due amount on credit card
This means that your principal is not paid and the interest is compounded. When you pay 3-4% extra interest every month on the unpaid amount, your debt grows faster than your ability to repay.
You miss loan EMI
This results in higher penalties, a sharp drop in credit score, or worse, taking another high-interest loan to repay the EMIs. You take a loan to repay the loan. This is the beginning of a vicious cycle, which results in you taking high interest loans to repay the existing loan, which ultimately becomes difficult.
Your debt-to-income ratio is more than 50 percent
If your EMIs are more than half of your income, you will be left with very little to meet basic needs and will end up having to borrow or use credit cards to make up the shortfall.
Your FOIR is more than 70 percent
A high Fixed Obligation to Income Ratio (FOIR) means you have less than 30 percent money left for essentials, which will lead to more debt and make it difficult.
You borrow for basic needs
If you use ‘Buy Now Pay Later’ or ‘Quick Fintech Loan’ to pay your rent, groceries or utility bills, your income will not be able to bear the burden of repayment. Your credit utilization is high. If you are over-utilizing your credit card or using 80-90 percent of the available credit limit, then it is possible that you are paying the minimum due amount or defaulting in payments, due to which you have accumulated more debt.
select safe ratio
Keep a debt-to-income ratio of less than 30 percent, which means that not more than 30-40 percent of your income should go towards repaying the loan. Similarly, ensure that your credit card utilization is below 30 percent, which means you should use less than 30 percent of your existing credit limit.
Lender ban, regulatory interference
To meet their financial targets, NBFCs and fintechs ignore checks and balances while granting credit. Srivastava says in the report that most of the loans are being given to Gen Z without proper underwriting check because high APR is being given, which creates repayment stress. In the absence of increase in per capita income, fintechs are deepening credit instead of expanding it by giving multiple loans to the same person, leading to overleveraging.
Choose your loan wisely
What to do
- Choose a secured loan, such as home, car, education or gold loan.
- Take a loan only to build assets, improve your career or increase your wealth.
- Use a credit card only to take advantage of rewards points, or in an emergency, and if you can afford to pay in full each time.
- It is best to keep the debt-to-income (DTI) ratio below 20 percent, but 30-40 percent is also fine.
- Keep your credit utilization ratio less than 30 percent.
what not to do
- Avoid unsecured loans, such as credit cards, personal, instant app, buy now pay later, microfinance or pay day loans.
- Do not take loan for your needs or for the things and services of your choice like travel or gadgets.
- Do not use the credit card for essential items or lifestyle upgrades, and only if you can afford the minimum amount. Exceeding the DTI ratio of 40-50 percent is a red flag.
- To avoid impact on your credit score, do not exceed the credit utilization ratio of 50 percent.