For many young Indians, financial planning begins with a simple question: Can I afford the EMI?
Whether it's a smartphone, a motorcycle or a home, the answer is increasingly shaped by the size of the monthly instalment rather than the full financial commitment behind it. Easy access to digital lending has done something genuinely good here — it has let a much wider set of young Indians into formal credit, often for the first time in their lives.
A credit story worth telling
That shift shows up clearly in the data. TransUnion CIBIL's most recent Credit Market Indicator report found that Gen Z accounted for 41% of all first-time borrowers in India.
Its 2026 Beyond the Swipe study goes further: half of India's new-to-credit-card users are now Gen Z, up from 43% just four years ago, with adoption increasingly reaching semi-urban and rural India rather than staying confined to the metros. For a generation just entering the workforce, this is financial inclusion working the way it's supposed to.
But access to credit and readiness for its consequences are two different things and they don't always grow at the same pace.
The EMI illusion
Call it the EMI illusion: affordability measured purely by the ability to make next month's payment, without asking whether that payment would still be possible if income stopped tomorrow. This isn't a flaw in borrowing itself. It's a gap in planning — and it's just as easy for someone with zero loans to fall into if they've never thought about protection either.
The Reserve Bank of India's own approach reflects this balancing act. In November 2023, it raised risk weights on unsecured personal loans and credit cards to cool overheating growth — a weight that still stands today. In 2025, it eased related norms for microfinance loans and for bank funding to NBFCs but left the core unsecured-lending weight untouched.
Even so, S&P Global Ratings expects household leverage to keep climbing, from just over 20% of GDP currently to about 31% by FY30 as retail lending expands. Credit will keep growing regardless. The real question is whether protection grows alongside it.
Where the balance sheet falls short
A young professional may be servicing a home loan, a car loan and a few consumer-durable EMIs, a sign of an expanding, aspirational balance sheet. Yet many of the same borrowers carry little or no term life insurance, lean entirely on an employer's health cover, and have no real emergency fund. One half of the plan is well built. The other half is often missing entirely.
This matters more than it might seem because a person's biggest financial asset in their 20s or early 30s is rarely their apartment or their investment portfolio, it's their future earning capacity. Someone earning ₹12 lakh annually today could go on to earn several crores over a three-decade career. That future income is what services every EMI, funds every long-term goal and supports every family responsibility down the line. Protecting it deserves the same attention as financing the next big purchase.
Healthcare and income blind spots
Healthcare adds urgency to this. India's medical inflation has consistently run among the highest in Asia, often well ahead of general inflation. A serious illness or accident can run into several lakhs in expenses, even for someone young and otherwise healthy. Without adequate health cover, that often means dipping into savings, breaking investments or taking on more debt just to cover the gap — the opposite of what the borrowing was meant to build toward.
Employer-provided health insurance helps, but it isn't a complete answer. It's tied to the job and can lapse during a career break, a switch, or a stretch of freelancing or entrepreneurship, all increasingly common paths for India's mobile, digital-first workforce. Relying on it alone leaves a gap that tends to show up at exactly the wrong moment.
Loss of income deserves the same attention as loss of life. Illness or injury that keeps someone off work for months can be just as disruptive as the risks life insurance is built for — and loan repayments don't pause to wait for a recovery.
Building the other half of the plan
None of this is an argument against borrowing. Credit remains one of the most effective tools for building assets and improving the quality of life, and Gen Z's growing comfort with it is, on balance, a good thing. The real task is making sure protection is treated as part of the same decision — not an afterthought that gets addressed later, if at all.
Term insurance deserves particular attention here. For anyone with dependents or outstanding loans, it's what ensures a home loan, a car loan or a family's future doesn't become someone else's burden if the borrower isn't around to repay it.
Before taking on a new EMI, it's worth asking a few questions alongside the interest rate and tenure: Could I keep up repayments if I lost my job for six months? Would my dependents be protected against outstanding liabilities if something happened to me? Do I have a few months of expenses set aside for the unexpected? A few "no"s here are worth addressing before the next line of credit gets added.
Critical illness cover
Health insurance is the foundation of any protection plan. Critical illness cover works alongside it, adding a dedicated layer for a specific set of high-cost, long-tail diagnoses where treatment and recovery can stretch over years.
It isn't there to fix a shortfall; it's added depth for exactly these situations. Between health, term and critical illness cover, most young earners have the three policies they actually need.
Real test of resilience
The most financially resilient households aren't necessarily the ones with the smallest loans. They're the ones that built a safety net before they needed one. EMIs help Gen Z acquire the life they want today; insurance and financial protection make sure one bad month doesn't take it away. Neither one does its job fully without the other.
Amit Chhabra is chief business officer at Policybazaar