Debt stress: Young Indians face hidden cost of easy credit options

Multiple credit cards secured for rewards. A personal loan to manage immediate pressure. And purchasing things young individuals cannot afford on EMIs, hoping their financial condition stabilises by the next salary cycle. These financial decisions seem manageable initially until we start missing payments, have unpaid EMIs, low credit scores, and loans taken out to repay an older one. 

With credit readily available, it is easy for people to fall into what Citizens’ Advice, an England-based financial service platform, calls financial quicksand, a worrying trend of impulsive spending and deepening debt due to a lack of financial planning.

This is the beginning of debt-induced stress. Before they know it, they are already knee deep in debt, puzzled about managing and recovering from it. 

Is chasing dreams on credit ideal? 

The emergence of social media in recent years has highly influenced the aspirations and consumption patterns of India’s youth, particularly Gen Z. 

Fintech platforms also aggressively target millennials and Gen Z consumers by offering them pre-approved loans with minimal documentation, a 2025 study by Social Values and Society (SVS) notes. 

Easy credit options have normalised credit-financed lifestyles among youth. This has created an increased consumption pattern where spending precedes earning. These options, therefore, pose a serious risk of over-indebtedness and long-term financial instability. 

“Even when I know I can't afford something, I feel like I have to keep up with my peers. Everyone's posting new gadgets, trips, clothes—if I don't, I feel invisible,” a 23-year-old respondent from Delhi says. Around 67 per cent of people surveyed in the SVS study report frequent anxiety about their financial situation.  

How to handle debt pressure? 

Single Debt, a Mumbai-based debt solutions company, explains that addressing the problem is the first step to achieving relief. Managing debt stress needs emotional care and structured action. 

Debt-induced stress thrives in silence. Sharing your worries with your loved ones can really help ease emotional burden. It often brings clarity to manage the situation efficiently.  

Once you have sorted these out, you will immediately feel lighter and more confident.

One of the more crucial steps is improving financial literacy among young individuals. “Many young people remain unaware of how credit works, the dangers of high interest rates, and the need for budgeting and saving,” according to Global Financial Market Review. 

Another Gurugram-based debt-relieving platform, Freed, also suggests negotiating with your banks to settle for less. The company explains that banks are open to negotiations if they believe you are genuinely unable to pay. This affects your CIBIL score, but at least makes you debt-free.

The psychological effect of debt 

One of the most common psychological effects of debt is persistent anxiety. Borrowers constantly worry about missed EMIs, collection calls from a legal recovery agent, legal notices, etc. This ongoing state of alert keeps the mind in survival mode, making it difficult to think clearly or make rational financial decisions. 

Many also withdraw from social situations due to the inability to afford outings. It can lead to shame or embarrassment in a public setting if a person’s financial limit becomes apparent. Particularly in peer groups that love branded or luxury consumption. 

The financial strain among the youth is more than just a monetary issue, it is deeply psychological and emotional. From anxiety, sleep issues, and low self confidence, the impact is multifaceted. Experts recommend practicing simple habits like setting financial goals, using budgeting apps, and engaging in money-saving habits. They can help stressed individuals turn in more resilient and informed people to efficiently handle their personal finances.