Holiday loans overtake home makeovers as top driver of personal borrowing

Mumbai: India’s appetite for credit-fuelled leisure is growing—and it is showing up in both loan books and foreign-exchange data.

A new report from Paisabazaar, based on a survey of over 5,700 respondents in 97 cities, finds that holidays have overtaken home renovations and medical needs as the leading reason for taking personal loans. In the first half of 2025, 27% of borrowers took a loan to fund a vacation, up from 21% two years earlier. That puts travel ahead of home improvements (24%), credit card repayments (11%), medical expenses (9.6%), education (6.1%) and weddings (5.4%). According to Santosh Agarwal, the firm’s chief executive, the figures reflect a growing willingness to use credit for lifestyle goals.

The shift is part of a broader surge in travel. Govt data show that more than 3 crore Indians travelled abroad in FY24, with numbers climbing further in FY25. On spending, the Reserve Bank of India’s data under the Liberalised Remittance Scheme indicate that Indians spent about $16.96 billion on foreign travel in FY25—accounting for 57–60% of all outward remittances during the year.

Millennials remain the largest cohort of holiday-loan borrowers, making up nearly half the total. But the fastest growth is among Generation Z: their share has more than doubled since 2023, to 29%. The report attributes this to a “new-age” consumer base—digitally adept, aspirational, and willing to spread the cost of leisure.

Demand is also shifting away from India’s biggest cities. Tier-2 and Tier-3 centres accounted for 71% of applications in early 2025, up from 68% in 2023. Borrowers in Lucknow, Surat, Jaipur, Patna and Durgapur are driving the change. In contrast, Tier-1 cities made up 29% of the market, with Delhi and Hyderabad residents responsible for more than half that share, followed by Mumbai (15%) and Bangalore (14%).

The sums borrowed are modest. Three in ten applicants took between Rs 1 lakh and Rs 3 lakh, while 20% opted for Rs 50,000 to Rs 1 lakh and 19% for Rs 3 lakh to Rs 5 lakh. Many prefer smaller loans that can be repaid quickly. Private sector employees dominate the pool, at 65%, followed by business owners (17%), self-employed professionals (12%) and government staff (6%).

Borrowers’ destinations vary. In foreign travel, South-East Asia leads, attracting 44% of respondents, ahead of the Middle East (32%) and the USA and UK (around 20% each). Within India, Goa tops the list, followed by Kashmir and Himachal Pradesh. Loan demand peaks in January and in May–June, which together account for 60% of borrowings. For a growing number of Indians, a holiday now comes with an EMI—and often a boarding pass.