Small Personal Loans Overtake Credit Cards in India's Unsecured Lending Market
Source: ET Banking
A new report from TransUnion CIBIL reveals that Indian consumers are shifting away from credit cards in favor of small-ticket personal loans. This trend highlights a significant change in how retail borrowers access consumption-linked credit for their daily needs.
- ▸Indian borrowers are increasingly choosing small personal loans over traditional credit cards.
- ▸Digital-first lenders and NBFCs are leading this shift in the unsecured credit market.
- ▸Small-ticket loans offer more predictable repayment structures compared to revolving credit card debt.
- ▸The trend is driven by consumption-linked credit and point-of-sale financing.
- ✓Indian borrowers are increasingly choosing small personal loans over traditional credit cards.
- ✓Digital-first lenders and NBFCs are leading this shift in the unsecured credit market.
- ✓Small-ticket loans offer more predictable repayment structures compared to revolving credit card debt.
- ✓The trend is driven by consumption-linked credit and point-of-sale financing.
The landscape of unsecured lending in India is undergoing a major transformation. According to the latest data from TransUnion CIBIL, credit cards are gradually losing their dominant market share as more consumers opt for small-ticket personal loans to fund their lifestyle and consumption needs.
The Rise of Small-Ticket Loans
For years, credit cards were the primary tool for short-term unsecured credit in India. However, the ease of digital processing and the instant availability of small personal loans—often ranging from ₹5,000 to ₹50,000—have made them a preferred choice for many. These loans are frequently used for immediate purchases, travel, or managing month-end cash flow gaps.
Why the Shift is Happening
Several factors are driving this trend in the Indian BFSI sector:
- Digital Accessibility: Fintech platforms and NBFCs have simplified the application process, offering approvals within minutes.
- Fixed Repayment Terms: Unlike credit cards, where revolving interest can become a trap, small personal loans offer fixed EMIs, making budgeting easier for retail borrowers.
- Targeted Consumption: Many of these loans are integrated directly into checkout pages (Buy Now, Pay Later), capturing the consumer at the point of sale.
Impact on the Banking Sector
While traditional banks continue to push credit card originations, the rapid growth of the small-ticket loan segment is largely driven by Non-Banking Financial Companies (NBFCs) and digital lenders. This shift suggests that the credit ecosystem is becoming more fragmented, with consumers choosing specific credit products for specific needs rather than relying on a single plastic card for all expenses.
However, experts warn that the proliferation of small-ticket loans requires careful monitoring. While they provide liquidity, the ease of access could lead to over-leveraging among young or first-time borrowers who may not fully grasp the impact on their long-term credit scores.
This article is for informational purposes only and does not constitute financial advice. Please consult a professional before making credit decisions.
Some listings may be sponsored. Mutual fund data is from AMFI and for information only — funds are subject to market risks. Review terms & suitability before investing. Not investment advice.
Frequently Asked Questions
Why are personal loans becoming more popular than credit cards?
Personal loans offer fixed interest rates and clear repayment schedules, which many find easier to manage than the revolving debt and high interest rates associated with credit cards.
What are small-ticket personal loans?
These are typically low-value loans, often under ₹50,000, provided quickly through digital platforms for short-term consumption needs.
Does taking multiple small loans affect my credit score?
Yes, every loan application and repayment behavior is tracked by bureaus like CIBIL. Frequent borrowing can impact your credit profile if not managed responsibly.
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