The EMI generation
- Are young people buying their future on credit ? -

Tejnarayan Thakur *

When “easy monthly payments” become a permanent part of a young person’s financial life

“A purchase may take only a few minutes, but the decision to repay it can follow us for years.”

A generation ago, purchasing a costly phone, car, motorcycle, or home equipment typically required months or years of savings. These days, a young person can enter a store or showroom, select a thing, and hear four appealing words: "Pay in easy EMIs." What used to need years of savings can now be paid for gradually and brought home right away.

This convenience has created what we might call the “EMI generation.” For young people, credit has become an increasingly normal part of everyday financial life. The question, however, is not whether young people should use credit. The more important question is : Are we using credit to build our future, or are we using our future income to pay for today's lifestyle ?

The growth of personal credit in India shows how significant borrowing has become. According to the Reserve Bank of India, bank credit to the personal-loan segment grew by 14% year-on-year as of March 21, 2025. Although this was slower than the 17.6% growth recorded a year earlier, personal credit was still expanding at a substantial pace.

For young consumers, EMIs can certainly have advantages. They make expensive but necessary purchases more manageable. A young professional who needs a laptop for work, for example, may not have Rs 60,000 available immediately.

An EMI can allow the person to acquire the laptop and pay over several months while conti- nuing to earn. Similarly, education loans can help students access higher education, while housing or vehicle finance can help households acquire productive or essential assets. Credit can therefore be a useful financial tool when it is used carefully. The problem begins when every want becomes an EMI.

Consider a young employee earning Rs 35,000 a month. He purchases a smartphone with a monthly EMI of Rs 3,000, a motorcycle with an EMI of Rs 6,000 and uses a credit card for shopping and entertainment.

He may also have subscriptions, rent, food, transportation and family responsibilities. None of these individual payments may look frightening. But together, they can consume a substantial portion of his monthly income.

At the end of the month, the salary may arrive and disappear almost immediately.

This is where the difference between affordable credit and dangerous debt becomes important. A person should not ask only, “Can I pay this month's EMI?” The better question is, “Can I comfortably continue paying this EMI even if my income falls or an emergency occurs?”

This question is particularly important for young people because the early years of employment are also the years when they should ideally be building financial foundations. Money that could have gone towards an emergency fund, insurance, investment or retirement savings may instead be committed to consumer loans.

There is another danger: the psychological effect of small monthly payments. A product costing Rs 50,000 may appear less expensive when presented as “only Rs 2,500 per month.” The monthly amount may look affordable, but the borrower must also consider the interest, processing fees and the total amount ultimately paid.

The Reserve Bank of India has acknowledged the significance of this issue. Its regulations regarding floating-rate personal loans, which are based on EMI (Equated Monthly Instalment), require regulated lenders to inform borrowers about how changes in benchmark interest rates could affect their EMI payments or the duration of the loan.

Digital lending has significantly increased the accessibility of borrowing. Loan applications can now be submitted via a smartphone, often in just a matter of minutes. While this convenience is advantageous, it can also create a perception that borrowing is as simple as online shopping. As the process of borrowing becomes easier, the importance of financial discipline becomes all the more essential.

Young people should therefore develop a simple habit before taking any EMI: calculate the total cost, not just the monthly payment. They should know the interest rate, processing charges, tenure, foreclosure conditions and total repayment amount. They should also check whether the loan is being offered by a legitimate regulated lender.

Most importantly, young earners should distinguish between productive debt and lifestyle debt. Borrowing for education, a necessary vehicle for employment, a home or an income-generating activity may serve a long-term purpose.

Borrowing repeatedly for the latest smartphone, expensive gadgets, luxury consumption or social-media-driven lifestyles may provide temporary satisfaction but can reduce future financial freedom.

EMIs come with an opportunity cost. For example, the ?8,000 paid each month towards consumer loans cannot be invested or saved at the same time. Over the years, consistent saving and investing can build wealth. However, high EMIs can lead to a situation in which a young person receives a salary but has limited control over their finances.

This does not mean that young people should fear credit. Credit is neither good nor bad by itself; its value depends on how responsibly it is used. A well-planned EMI can help a person acquire an asset, improve productivity or manage a necessary expense. An impulsive EMI can turn tomorrow's income into today's consumption.

For young people across India, financial literacy has become an essential skill in today's dynamic economic landscape. With the increasing prevalence of digital payment systems, online shopping, consumer finance, and instant credit, it is vital for young individuals not only to learn how to earn income but also to understand the effective management of borrowed funds.

This encompasses recognizing the implications of debt, grasping interest rates, and planning for future expenses. As these financial tools become more commonplace, equipping the youth with the necessary knowledge and skills is crucial for promoting financial stability and empowering them to make informed, long-term financial decisions.

The real measure of financial success is not how many things a young person can buy on EMI. It is how much financial freedom remains after the EMI is paid.

Before signing the next loan agreement, every young borrower should ask three simple questions: Do I need it? Can I afford it without sacrificing savings? And will this debt improve my future or simply finance my present lifestyle?

Because an EMI may make today's purchase easier—but it can also make tomorrow's freedom harder.

The goal of youth should not be to own everything today, but to build a financial life in which tomorrow is not already owned by someone else.