Travel on Credit: How Holiday Loans Are Redefining Aspirations in India

Holiday loans are transforming how Indians fund vacations, with 27% of personal loan borrowers in 2025 using them for travel, up from 21% in 2023. Tier-2 and Tier-3 cities fuel this growth, contributing 71% of borrowers. Gen Z participation surged to 29%, and smaller loans (₹1–3 lakh) gained traction. Private sector employees dominate the borrower pool, while Goa and Southeast Asia top destinations. This shift reflects growing aspirations, with credit becoming a tool for lifestyle enhancement and "Travel Now, Pay Later" gaining popularity.

The way Indians fund their vacations is changing, with a growing number of consumers turning to personal loans to finance their travels. According to a recent report by Paisabazaar, 27% of personal loan borrowers in the first half of 2025 used the funds for travel, a noticeable jump from 21% in 2023. This trend has made holiday financing the second-most popular reason for taking personal loans, surpassing home renovation.

Credit-Driven Wanderlust in Smaller Cities

A striking feature of this evolving pattern is the dominance of non-metro consumers. The report, aptly titled “How India Travels Using Holiday Loans (Vol. 2.0)”, found that 71% of holiday loan borrowers hailed from Tier-2 and Tier-3 cities, up from 68% in 2023. Cities like Lucknow, Surat, Jaipur, Patna, and Durgapur emerged as key contributors to this surge, reflecting the aspirations of smaller towns to embrace travel on credit. In contrast, metro city borrowers accounted for just 29% of these loans, a slight dip from 32% in 2023.

Santosh Agarwal, CEO of Paisabazaar, highlighted this shift, stating, “Consumers are increasingly using credit to meet lifestyle needs, and the rise in holiday loans is a testament to this transformation.”

Key Trends: Travel Outpaces Home Renovation

The report underscores several noteworthy trends in holiday financing:

• Travel Surpasses Home Renovation: In 2025, 27% of personal loans were allocated to travel, overtaking home renovations, which dropped from 31% in 2023 to 24%.

• Peak Borrowing Periods: January, May, and June accounted for 60% of travel loan disbursals in 2025, with January alone contributing 21%, highlighting the popularity of winter vacations.

  
  

Gen Z Leads the Charge

Younger borrowers are driving the holiday loan boom, with Gen Z (aged 20–30) showing the fastest growth. Their share of holiday loans surged from 14% in 2023 to 29% in 2025. Millennials (aged 30–40) remained the largest group, contributing 47% of holiday loan demand.

This generational shift reflects a changing mindset, with younger Indians viewing borrowing as a means to enhance their lifestyles rather than just a necessity.

Smaller Loans Gain Popularity

The trend toward smaller loan amounts is another significant development:

• 30% of borrowers in 2025 opted for loans between ₹1–3 lakh, up from 13% in 2023.

• Loans in the ₹50,000–1 lakh range grew from 12% to 20%.

• Even loans below ₹50,000 rose sharply, from 2% in 2023 to 15% in 2025.

This preference for smaller ticket loans indicates that travelers are becoming more cautious about borrowing, opting for manageable amounts to fund their adventures.

Employment Profiles of Borrowers

Private sector employees dominated the borrower pool, making up 65% of holiday loan users in both 2023 and 2025. Business owners showed an increase, rising from 12% to 17%, while government employees and self-employed professionals maintained modest shares of 6% and 12%, respectively.

Top Destinations Funded by Loans

The destinations chosen by loan-funded travelers offered a mix of domestic and international flavor:

• Domestic Favorites: Goa (18%), Kashmir (16%), and Himachal Pradesh (14%) topped the charts.

• International Getaways: Southeast Asia led with 44% of preferences, followed by the Middle East at 32%.

The Future of Credit-Fueled Travel

As digital lending platforms simplify access to credit, the "Travel Now, Pay Later" mindset is gaining traction. With a growing number of non-metro and younger consumers embracing holiday loans, credit is no longer seen merely as a financial necessity but as a tool for achieving aspirations.

This evolving trend marks a shift in how Indians perceive borrowing, blending financial planning with the desire to explore the world. Whether it’s peak borrowing during holiday seasons or the rising popularity of smaller loans, the future of travel in India appears to be firmly tied to the power of credit.