Why the personal lending story must move to planning

This article is authored by Vinay Singh, co-founder & chief product officer, Olyv.

Applying for a loan has traditionally been associated with stress and urgency. Unexpected medical expenses, household emergencies, or temporary income disruptions often force individuals to seek credit at short notice. However, the way Indians approach borrowing today is changing. More borrowers are evaluating credit options with greater awareness and aligning borrowing decisions with their broader financial goals. As India’s personal lending market is expected to touch ₹8 trillion this year and continue growing at a healthy pace, the shift from emergency-driven borrowing to purpose-led borrowing deserves closer attention.

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The rise of digital financial platforms has fundamentally changed how people access and evaluate loans. Information that once seemed difficult to understand is now available at the click of a button. Borrowers can compare interest rates, estimate EMIs, review repayment schedules, and assess affordability before making a decision.

As a result, credit is no longer viewed as a one-time financial transaction. It is increasingly becoming an important component of overall financial planning. Borrowers are integrating credit into their long-term financial strategies rather than using it only as a last resort.

The numbers reflect this evolution. Retail loans, including digital personal loans, increased by 9.3% to 35 million in Q3 FY26 from 32 million in Q3 FY25. This growth highlights the increasing adoption of formal credit and reinforces the emergence of personal lending as one of the fastest-growing segments in the financial ecosystem.

Smaller-ticket personal loans have also played a key role in this transition. These products allow borrowers to address specific financial requirements without taking on unnecessary debt. As a result, borrowing is becoming more purpose-driven and disciplined rather than convenience-led.

Personal loans are increasingly being used to create long-term value. Borrowers today are turning to credit for education, skill enhancement, small business expansion, and asset creation. This reflects a broader understanding of how credit can be used as a tool to improve financial well-being and support upward mobility.

The shift is particularly visible across Tier II and Tier III cities. Greater smartphone penetration and seamless digital onboarding have made formal lending more accessible to first-time borrowers. According to TransUnion CIBIL, non-metro markets continue to drive a significant share of credit demand, signalling a transformation in both access and borrowing behaviour.

Importantly, borrowers in these markets are not merely seeking access to credit. Many are using loans to strengthen income-generating opportunities and improve long-term financial stability. In such cases, planning becomes even more critical, as repayment capacity is often linked to future earnings and growth prospects.

There was a time when easy approvals and pre-approved offers encouraged borrowers to take loans without fully understanding the associated terms and obligations. That behaviour is gradually changing.

Today’s borrowers are paying closer attention to interest rates, loan tenure, and total repayment obligations before committing to a loan. They are asking more informed questions and making more deliberate decisions.

Credit scores, too, have become a regular part of financial conversations. Easy access to credit reports has encouraged people to monitor their credit health and understand how borrowing decisions can influence future credit opportunities. This growing awareness is bringing greater accountability to the borrowing process.

The Reserve Bank of India has also highlighted concerns around rising exposure to unsecured credit, underlining the importance of responsible borrowing. As credit penetration expands, informed decision-making will be essential to maintaining financial stability at both individual and systemic levels.

Technology is quietly influencing financial behaviour in meaningful ways. Loan calculators, repayment reminders, and credit tracking tools help borrowers stay informed and organised throughout their credit journey. These tools reduce the risk of missed payments and support better financial planning.

At the same time, managing multiple loans has become increasingly common. Many borrowers today maintain a combination of small-ticket and large-ticket credit products. Without careful planning, this can create financial strain. However, when managed responsibly, it can provide greater flexibility and help borrowers meet diverse financial needs.

Data from CRIF High Mark shows that many borrowers hold multiple active loan accounts, making structured repayment strategies increasingly important. Effective planning ensures that credit remains an enabler of growth rather than a source of long-term financial pressure.

India’s personal lending ecosystem has matured significantly over the past decade. While access to credit has expanded considerably, the next phase of growth will depend on how responsibly that access is utilised. Borrowers who align credit with clearly defined goals are more likely to create stronger and more sustainable financial outcomes.

Lenders, regulators, and digital platforms all have a role to play in supporting this transition. Greater transparency, financial education, and tools that empower informed decision-making can help strengthen the overall ecosystem.

India does not simply need more borrowers--it needs more informed borrowers. Whether credit is used for education, entrepreneurship, or building financial security, the outcome often depends on the intent behind the borrowing decision. Loans taken with planning and purpose are more likely to create lasting value. That shift from urgency to intentionality may well define the future of personal lending in India.

(The views expressed are personal)

This article is authored by Vinay Singh, co-founder & chief product officer, Olyv.