Why Gen Z borrows for experiences and keeps investments intact

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For years, taking a personal loan carried a social stigma and was viewed only as a last resort for financial distress. Today, Gen Z does not work with this mindset. Personal credit, according to industry experts, has become a widely used liquidity tool that young people do not shy away from.

With higher financial literacy, younger borrowers are leveraging personal loans to fund lifestyle choices, experiences, travel and discretionary spending, all while keeping their investment portfolios intact.

According to credit bureau CRIF Highmark, Gen Z’s consumption credit portfolio expanded to reach ₹14.7 trillion in May 2026, up 23.8% year-on-year. Notably, this borrowing is predominantly driven by unsecured debt, which includes personal loans and credit cards that account for 71% or ₹10.9 crore of their total active loans.

Amit Pathak, business head of personal loans at Kotak Mahindra Bank, highlights a shift from a "distressed product" to a routine credit tool. Pathak notes that today's younger, affluent borrowers use personal loans to fund once-in-a-lifetime events, such as travelling to see the ‘New Zealand moon’ or participating in a London marathon, rather than liquidating market assets.

"They don't want to disturb the compounding, and plus the moment they pull out investments, it will trigger the capital gains tax," Pathak explains regarding the borrower mindset. Instead, they borrow short-term to protect compounding returns.

Post-covid, the desire to prioritize experiences, like flying out for a Taylor Swift concert or a FIFA World Cup, is now paired with a sharper understanding of how one can fund it, said Parijat Garg, a digital lending consultant and former SVP at CRIF Highmark.

Garg also pointed to the rising salaries in the technology and AI ecosystems that provide surplus income, giving the younger consumers confidence that they can repay their debts.

Data from CIBIL's Beyond the Swipe 2026: How India Uses Card as a Credit Instrument report shows that at the time of first card origination, 31% of Gen Z consumers already have two or more open credit accounts in their wallets.

Gen Z consumers are also more likely to already have consumption-led credit products in their wallet, with 18% holding an open consumer durable loan and 23% holding an open small-ticket personal loan at first card opening, said the report.

However, this strategy is as much psychological as it is mathematical. Suresh Sadagopan, founder of Ladder7 Financial Advisories, said a distinct behavioural quirk among Gen Z. He said young investors often become highly possessive of the portfolios they have built, so many are not willing to touch them for short-term goals. For many, EMI serves as a form of "good pressure" that helps them control their day-to-day spending, he added.

Calling for prudence, Sadagopan warned that borrowing can become a mistake if a loan costs more than what the underlying investment returns.

Further, the younger cohort is proving credit-conscious. CRIF Highmark data also show that Gen Z’s delinquency rate (PAR 31–180) has declined to 2.7% as of May 2026, outperforming the overall consumption loan portfolio.

To sustain this discipline, Garg advised young consumers to pace their purchases, evaluate credit card EMI options beforehand to maximize reward structures, and always invest in travel insurance to shield themselves from unexpected financial shocks.

“Going for a holiday or buying a fancy home theatre system is part of an experiential lifestyle people are living today,” said Santosh Joseph, founder of Germinate Investment Services. "The people who can afford this take EMIs and manage their cash flow accordingly. The people who cannot afford to, but leverage the sheer availability of credit, are the ones who get into trouble.”

One cannot risk using their credit card loan to buy something, failing to pay it off, and ending up paying 3...