After the pandemic, there’s been a big increase in personal loans and credit card borrowings. The good side of this is the deepening of credit, but the bad side is some people seem to have borrowed too much or borrowed despite not being able to afford it. A lot of these are small ticket loans under Rs 10,000 from fintech apps. I wonder how much of this is due to the incessant spam from these loan apps nudging people to take “instant pre-approved” loans.

The defaults among this segment that can’t afford to take loans are starting to increase. This data is from CRIF. These delinquencies started to show up in the numbers of banks and NBFCs a couple of quarters ago. So yeah, we’ll get to know the true extent of the problem in the next couple of quarters.

The lowest hanging fruit and the most bang for your buck thing you can do with your personal finances is to pay off all your high-interest loans, including credit cards. If you are in debt, the psychological effects will show everywhere from your personal life to your workplace. Ensuring you get out of debt has to be the first thing you do even before you save and invest.

We wrote about this in today’s Daily Brief on Markets by Zerodha. Check the Daily Brief article here.

Link to the research paper here.

And this has been a personal experience.

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