Credit Card and Personal Loan Usage in India: What Recent Trends Show

Personal loan growth moderated to 12.9% in March 2026, even as loans made up 30.7% of bank credit and access to formal credit widened.

There are a lot of changes in the way people use credit cards in India. They have started using various borrowing options to manage daily expenses. Credit cards are mainly used for short-term credit, whereas personal loans are used for planned as well as unplanned expenses. Recent data shows that consumers are now exploring different forms of unsecured credit.

India’s Credit Habits Shift as Small-Ticket Loans Gain Ground

Personal loan growth moderated at 12.9% year on year at the end of March 2026. This shows how the retail borrowing is changing in India. These developments underline the importance of understanding consumer credit trends and managing debt responsibly.

Recent Trends in Credit Card and Personal Loan Usage in India

1. Credit Card Usage is Becoming More Selective

There has been a rise in credit card usage for online shopping, travel bookings, groceries and dining expenses. Moreover, these credit cards offer cashback and reward points, which have made it more appealing among young customers.

But recent trends indicate that credit cards are facing tough competition from other borrowing products. The share of open credit cards in India’s overall unsecured credit portfolio declined from 56% in 2016 to 38% in 2026. This reflects the shift in the composition of unsecured credit. But still, it doesn’t completely mean that fewer consumers are using credit cards.

2. Small Ticket Loans Have Increased

This shift indicates borrowers feel more comfortable with a fixed amount of funds rather than revolving credit. Small ticket loans help them deal with various expenses like home renovation, car repairs, education expenses and other short-term needs. However, borrowers should compare interest rates, processing fees, and repayment obligations before accepting an offer.

3. Personal Loan Growth Remains Significant

Personal loans are still considered to be the most important part of India’s banking system. Personal loan growth moderated to 12.9% at the end of March 2026. Moreover, personal loans also accounted for 30.7% of the total bank credit. These figures reflect the importance of retail borrowing despite slower growth in comparison to previous years.

Borrowers are also using personal loans for planned expenses as well as for debt consolidation. However, before applying for a personal loan, they should evaluate their income, existing EMIs, repayment period and total interest payable. A longer tenure may reduce monthly instalments, but it will increase the total interest paid over the loan’s lifetime.

4. Digital Lending Is Changing Borrowing Behaviour

Due to digital lending platforms, borrowers can now compare various loan options and then apply online. Even many banks and NBFCs are now offering online loan applications, digital document submission and electronic disbursal.

Formal credit is no longer just limited to major metropolitan cities. The proportion of eligible Indians who had accessed credit at least once has increased from 35% in March 2017 to 74% in March 2026. This shows the rise of India’s formal credit system, which also includes consumers outside traditional credit markets.

But digital lending has various risks too. Hence, borrowers should double-check the lender before taking a loan. They should read the Key Fact Statement very carefully and also go through the APR and various charges.

Borrowers Should Pay Greater Attention to Credit Costs

As households manage expenses such as housing, education, healthcare and transportation, the cost of borrowing becomes increasingly important. A credit card may be very convenient for every purchase, but if you are carrying an unpaid balance on it, then it will increase the interest burden. Moreover, paying only the minimum amount due will lead to prolonged debt and will increase the total cost.

In a similar manner, an advertised loan interest rate doesn’t show the total borrowing cost. There are also other charges like processing fees, insurance charges, late-payment penalties, etc., which can affect the total amount payable.

Consumers should also take into consideration the total repayment amount rather than just focusing on monthly instalments. They should also maintain an emergency savings where possible. Moreover, before taking any new credit to repay the existing debt, they should assess if doing so is affordable or not.

How to Choose Between Credit Cards & Personal Loans

The right borrowing depends on the purpose, amount you need, and the ability to repay.

• Credit Cards: They can be used for daily purchases and short-term expenses. But one should only use it if they can pay the entire outstanding amount by the due date.
• Personal Loans: - It’s advisable to go for a personal loan for one-time expenses and if you want a proper repayment structure.
• Emergency Savings: - This is very useful during times of sudden expenses and emergencies. It will save you from any kind of debt.

While comparing the best credit cards in India, one should check the annual fees, reward conditions, interest rate, late-payment charges and benefits that match their actual spending habits.

When it comes to personal loans, one should compare multiple regulated lenders and check eligibility requirements before applying.

Conclusion

Credit card and personal loan usage in India is evolving as consumers are looking for different borrowing options to fulfil their financial needs. While credit cards remain useful for everyday purchases, small-ticket loans and personal loans are getting popular for specific expenses. Moreover, due to digital lending, getting a loan has become quite easy.

But borrowers should be very careful about interest rates, processing fees, and repayment obligations. Before opting for a credit product, it is advisable to assess income, existing debt and repayment capacity. While comparing the best credit cards in India or evaluating loan offers, consumers should focus on the total borrowing cost rather than promotional benefits alone. Responsible borrowing and timely repayments can help maintain financial stability and a healthy credit profile.

Note to the Reader: This article is part of Hindustan Times' promotional consumer connect initiative and is independently created by the brand. Hindustan Times assumes no editorial responsibility for the content.

The content may be for information and awareness purposes and does not constitute any financial advice.