Why 1 In 4 Gen Z Indians Take Their First Loan Before The Age of 22?

Gen Z in India is altering the way society sees money and identity, and thus, finance is being regarded as a much more expressive tool than ever before. Budgeting apps, digital payment systems, micro-investments, and buy-now-pay-later (BNPL) schemes are not merely financial tools for the young Indians but also interpretations of their identity traits - competent, fast, and focused on experiences.

The last few years have brought a significant change in the financial behavior of the under-25 age group. What the previous generations saw as purely transactional activities - saving, spending, borrowing, Gen Z is increasingly interpreting as a part of lifestyle curation. Their financial management choices reflect values like cleanliness of mind, striving for the entrepreneurial spirit, and the craving for versatility.

Adhil Shetty, CEO of BankBazaar, captures this transition clearly: "Gen Z is turning personal finance into a lifestyle choice. Their money habits reflect identity, convenience, and control rather than pure transaction. The Aspiration Index 2024 shows that mental health tops their priorities, entrepreneurship is a core ambition, and house ownership remains a long-term marker of stability. They enter credit early, with one in four accessing their first loan or credit card before 22, and 36 percent taking education loans."

This sits alongside a mobile-first mindset highlighted in YouGov's findings, where most Gen Z rely on banking apps for daily transactions. Their appetite for flexible credit is shaped by BNPL culture, as noted in PwC's Gen Z consumer trends, even though 43 percent report higher credit dependence and almost a quarter struggle with repayments.

"For the industry, the message is clear. Build simple, transparent, real-time tools that fit the way Gen Z manages money. Institutions that evolve with these preferences will be well positioned to meet this generation's financial needs in the years ahead," Adhil Shetty further added.

According to EY India, 83% of Gen Z prefer to use digital-first financial services. Another analysis of India Buy Now Pay Later (BNPL) market size and forecast by Modor Intelligence shows that ~40% of BNPL customers are below 25 years of age. All the statistics point to a generation that wants financial management to be simple and quick.

The concept of "money as identity" is very much alive, through personalised savings challenges, investing small but consistently as a practice, and also as a means of empowerment.

Another perspective by Shikha Mittal, Founder & Director, Be.artsy and Be Your Own Lakshmi - a financial literacy program, highlights the double-edged nature of this shift. "I have interacted with youth a lot since 2010 due to Be.artsy's youth platform Be on the street festival and one thing stands out for me- Gen Z is curious, fearless, and incredibly open to learning about money. In fact, as per data, almost 80% prefer digital-first finance, and many start investing while still in college."

"But many micro-investing apps and budgeting apps are financial businesses that do not have fair practices. It is not that Gen Z is reckless; rather, they are targets for these new-age businesses that manipulate young investors. As educators and awareness experts, it is our responsibility to lead young India so that Gen Z doesn't make the same mistakes we did. Giving them the power of perspective with the right knowledge and tools is our responsibility," Shikha Mittal further added.

Industry experts say that this change in behavior is going to be the future of retail finance. Gen Z is entering the job sector and becoming the largest group of buyers; their demands in terms of money handling will probably be the main reason why banks, insurance companies, and wealth-tech apps will change.

The financial revolution in India for the next ten years might depend on a single factor: for Gen Z, money matters are not only practical-they are a part of one's personality, a dream, and a way of living, all mixed up.

Disclaimer: The views and recommendations expressed are solely those of the individual analysts or entities and do not reflect the views of Goodreturns.in or Greynium Information Technologies Private Limited (together referred as "we"). We do not guarantee, endorse or take responsibility for the accuracy, completeness or reliability of any content, nor do we provide any investment advice or solicit the purchase or sale of securities. All information is provided for informational and educational purposes only and should be independently verified from licensed financial advisors before making any investment decisions.