1 in 4 personal loans in 2025 funded holidays, 71% from Tier-2 & -3 cities

Vacations have officially gone on EMI. According to Paisabazaar’s new report  27% of personal loan borrowers in the first half of 2025 used the funds to finance travel—up from 21% in 2023—making holidays the second-most common reason for taking a personal loan. Notably, 71% of these borrowers came from Tier-2 and Tier-3 cities, reflecting the rising aspiration among non-metro consumers to explore the world—on credit.

 

The report, titled “How India Travels Using Holiday Loans (Vol. 2.0)”, draws insights from over 5,700 respondents across 97 cities and towns and highlights a noticeable uptick in credit-fueled holidays, particularly among Gen Z and residents of Tier-2 and Tier-3 cities.

 

 

“We are seeing consumers becoming increasingly comfortable and confident in using credit to meet aspirations and lifestyle needs, and the rise in holiday loans reflects this shift,” said Santosh Agarwal, CEO of Paisabazaar. “With the second edition of our holiday loans report, we are happy to share insights into how different segments are financing their travel aspirations.” 

27% of respondents took a personal loan to fund their vacation in H1 2025, up from 21% during the same period in 2023.

 

 Key Trends: Holiday Loans Outpace Home Renovation

27% of all personal loan borrowers in H1 2025 used the funds for travel, compared to 21% in 2023.

 

Travel-related borrowing overtook home renovations, which dropped from 31% in 2023 to 24% in 2025.

 

Smaller Cities Drive Holiday Loan Boom

The heart of this rising trend lies outside metro India.

 

71% of holiday loan borrowers in 2025 were from Tier-2 and Tier-3 cities, up from 68% in 2023.

 

Metro city contributions shrank to 29%, from 32% in 2023.

 

Top non-metro contributors included Lucknow, Surat, Jaipur, Patna, and Durgapur. 

The survey highlighted a clear preference for vacation loans among non-metro borrowers, with 71% of applicants coming from Tier-2 and Tier-3 cities, compared to just 29% from Tier-1 cities.

 

Delhi, Hyderabad Top Metro Markets

While metros saw a dip in their share, demand remained strong in some key cities:

 

Delhi led the metro pack with 35% of the holiday loan share.

 

Hyderabad followed at 18%, while Mumbai and Bangalore contributed 15% and 14%, respectively.

 

Chennai, Kolkata, and Ahmedabad each made up 6% of metro demand.

 

 Young Borrowers Drive the Surge

Gen Z—those aged 20–30—emerged as the fastest-growing segment of holiday loan borrowers:

 

Their share jumped from 14% in 2023 to 29% in 2025.

 

Millennials (30–40 years old) remained the dominant group, contributing 47% in 2025.

 

 Smaller Ticket Loans Become More Popular 

About 30% of consumers who took Holiday Loans borrowed between Rs. 1 lakh and Rs. 3 lakh, 20% borrowed between Rs. 50,000 and Rs. 1 lakh, and 19% chose loan amounts between Rs. 3 lakh and Rs. 5 lakh.

As more Indians explore credit-backed travel, preferences are shifting toward smaller loan amounts:

 

30% of holiday loans in 2025 were between ₹1–3 lakh, up from 13% in 2023.

 

Loans of ₹50,000–1 lakh grew from 12% to 20%.

 

Loans below ₹50,000 rose significantly—from 2% in 2023 to 15% in 2025.

 

 Private Salaried Class Leads Borrowing

Employment status played a key role in borrower profiles:

 

65% of borrowers in both 2023 and 2025 were private salaried employees.

 

Business owners’ share rose from 12% to 17%.

 

Self-employed professionals held steady at 12%, while government employees accounted for 6%.

 

 Peak Demand in January and Summer Months

Indians prefer to travel when weather or holidays align:

 

60% of holiday loans were disbursed during January, May, and June 2025.

 

January alone saw 21% of all travel loan disbursals, indicating a strong winter vacation preference.

 

 Top Travel Destinations for Loan-Funded Holidays

Whether domestic or international, borrower preferences were clear:

 

Domestic Destinations:

 

Goa (18%)

 

Kashmir (16%)

 

Himachal Pradesh (14%)

 

International Destinations:

 

South East Asia led with 44% preference

 

Middle East followed at 32%

 

 Indian consumers, especially younger and non-metro populations, are using credit as a tool for lifestyle enhancement. The rise in smaller-ticket loans, peak borrowing during vacation months, and growing Gen Z participation all point to a shift in how borrowing is perceived—not just as a necessity, but as a way to fuel aspiration.

 

With digital loan platforms making access faster and more transparent, and consumers demanding greater flexibility, the "Travel Now, Pay Later" mindset is poised to become even more mainstream.