How much debt is too much? India's EMI addiction gets too tempting to curb

'Zero cost EMI', 'Buy now, pay later' and 'Instant loan in 5 minutes' – walk into any Indian e-commerce app or fintech lending platform today, and you'll find these tempting offers staring back. What once was a rare financial tool has now become a lifestyle — and a trap.
India is in the middle of a silent credit revolution. Fuelled by smartphone penetration, fintech innovation, and the promise of 'frictionless' borrowing, millions of young Indians are swiping their way into EMIs, micro-loans, and Buy Now Pay Later (BNPL) schemes without a second thought. But this revolution comes with a dark underbelly — one filled with hidden interest rates, app-based harassment, spiraling debt cycles, and long-term financial damage.
In India's rapidly digitising economy, credit is no longer a privilege — it's a push notification.
From buying smartphones to booking vacations, 'easy EMIs' have lowered the barrier for spending. BNPL platforms let users buy essentials (and non-essentials) with just an Aadhaar and PAN. This may sound empowering — and in many ways it is — but the ease of access also means ease of abuse.
As Kunal Varma, Co-Founder and CEO of Freo, puts it 'The availability of easy EMIs and small-ticket credit has changed the way young Indians borrow money. But this better access to credit has also made it easier to borrow money without thinking, often without fully knowing how much it costs. Ease shouldn't mean sacrificing your long-term financial health."
This psychological shift is subtle but powerful — credit feels less like a responsibility and more like a lifestyle extension.
Even though the financial environment is easy, many customers do not know what they are getting themselves into. In the fine print, you may find hidden fees, requirements for your bank to auto-debit, late payment fees, and consequences for your credit score. A purchase of ₹ 10,000 with BNPL might look great, could quietly become a nightmare repayment of ₹ 14,000.
Bhushan Padkil, SVP & Head, Direct‑to‑Consumer Business, TransUnion CIBIL, explains 'Opting for EMIs or Buy Now Pay Later plans can make purchases more manageable and accessible. However, it's important to know that lenders consider your total ongoing credit obligations and repayment patterns when evaluating your creditworthiness. By keeping a close eye on your repayment schedules and regularly reviewing your credit report, you can make the most of these options and build a strong foundation for long-term financial health.'
Frequent borrowing may seem harmless, but it chips away at your creditworthiness. Miss a payment or max out your app-based credit line, and it could affect your chances of getting a home loan or even a job in the future.
App-based lending can create an immediate dopamine response for many borrowers, especially Gen Z/young professionals who experience instant gratification with delayed consequences. Defaults unfortunately can lead to even greater pressure.
Aggressive recovery tactics are not out of the ordinary: social media threats, public humiliation through access to someone's contact list, and ongoing harassment through continuous calling. There has been some intervention from regulatory bodies; however, enforcement is akin to whack-a-mole in terms of new apps appearing every other day.
At its core, this is as much a psychological issue as it is financial. The gamification of credit against a backdrop of limited credit literacy may trigger uninformed decisions and unnecessary suffering.
There is, however, a growing sense of responsibility among serious players in the fintech ecosystem. According to Rohit Mahajan, Managing Partner and Founder, plutos ONE, 'Fintech lenders are rapidly scaling, but long-term sustainability depends on ethical practices and borrower empowerment. Guided by RBI's digital lending framework, leading platforms are ensuring transparency through clear disclosures, consent-based data use, and fair interest rates.'
This pivot — from hypergrowth to responsible innovation — is vital if the ecosystem wants to avoid a systemic collapse or a regulatory clampdown.
The RBI has already taken note, issuing guidelines on digital lending, APR disclosures, and embedded finance practices. But the scale and speed of India's unsecured lending boom still pose a risk to the broader financial system.
Kushal Rastogi, Founder & CEO of Knight Fintech, warns, 'India's credit ecosystem is evolving; banks are eager to deploy capital, while borrowers seek quick, fair access to funds. But true financial inclusion must be built on accountability. As regulations tighten around APR disclosures and risk controls, smarter, tech-enabled lending is the way forward. This shift is driven through embedded finance, co-lending frameworks, and UPI-based digital disbursements helping lenders serve new-age borrowers while maintaining control over risk, compliance, and how credit is used.'
If left unchecked, today's credit boom could echo past bubbles — only this time, the damage may spread across millions of app-driven, under-informed borrowers. Before tapping, read: Know the interest rate, payback terms, and late charges before applying for any credit. Don't overwhelm yourself with credit: Even if you initially view several EMI purchases as harmless, these can accumulate quickly. Continuously monitor your credit: One missed payment, even if it is small, can really affect your credit score and your creditworthiness in the future.
The loan industry in India has entered a tremendous transition that is empowering and risky. If you are not careful, what starts as a 'Buy Now' will quickly become a 'Cry Later.' The fintech revolution should be one that helps the masses, not traps them. It requires understanding, responsibility and thoughtful decisions in addition to regulations and technology.
Disclaimer: Mint has a tie-up with fintechs for providing credit; you will need to share your information if you apply. These tie-ups do not influence our editorial content. This article only intends to educate and spread awareness about credit needs like loans, credit cards and credit scores. Mint does not promote or encourage taking credit, as it comes with a set of risks such as high interest rates, hidden charges, etc. We advise investors to discuss with certified experts before taking any credit.

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