Gen Z Debt Crisis: Earning ₹30,000 but Owing ₹40 Lakh? The Digital Loan Trap Explained

Even with low salaries, Gen Z youngsters are getting trapped in lakhs of debt because of easy digital loans. Are you also caught in this debt spiral? Here are 7 major warning signs and how to spot them.

Let's talk about a real incident. Vidyut Sharma, a Pune resident, tried to become a freelance photographer at the age of 19. To buy a modern camera and accessories, he started taking small-small loans from different places. But in just a few years, with all the interest piling up, his total debt ballooned to a shocking ₹40 lakh. He had a total of 54 different loan accounts in his name. And his monthly income at that time? Less than ₹30,000.

This is what Vidyut says: “By 2021, I felt like I didn't even need my own money. I could get a loan instantly on my mobile. There was no need for any guarantee or paperwork. But I had never imagined how terrible the consequences would be if I missed a monthly EMI.” He started getting 15–20 calls from recovery agents every single day, and they even started showing up at his house to harass him. Unable to handle the pressure, he finally got help from a debt counselling company. His loan is now down to ₹5 lakh.

But this isn't just one guy's story. It's the reality for thousands of Gen Z youth. Every month, hundreds of young people between 25–35 years of age are asking for help to get out of their debt problems. And many more are trapped without even asking for help. Cases of people earning ₹30,000–₹40,000 a month but being stuck in lakhs of rupees of debt are increasing. The main culprits seem to be the easily available digital loan apps, credit cards, and fintech companies.

The Gen Z generation, born between 1997 and 2012, is said to be the first generation to take on more debt than previous ones. In our parents' generation, taking a loan was considered a bad thing. But now, it has become a part of a normal lifestyle.

₹30,000 Salary… But a ₹30–40 Lakh Loan? How?

Most Gen Z youth are not taking loans for a house or a car. Instead, they are borrowing for:

• New mobiles and gadgets
• Travel and lifestyle expenses
• Courses and career upgrades
• Daily expenses

You can get a loan in just a few minutes on a mobile app. Because it's so easy, young people take loans without thinking much. Later, when they can't pay the EMI, they take a new loan to clear the old one. This is how the debt keeps increasing, creating a vicious cycle.

What does the data say? A whopping 41% of new loan takers are from Gen Z. Among those taking loans from NBFCs and fintechs, 65% are between 26–35 years old. For loans under ₹50,000, 26% of people have failed to pay their EMIs. This clearly shows that Gen Z is struggling to manage debt.

An Expert's Warning

Financial expert Anurag Mehra says: “Most young people are spending more than they earn. They are living paycheck to paycheck. By the end of the month, there's no money left.”

7 Warning Signs You Must Look Out For

1. Taking another loan just to pay an existing EMI.
2. More than 40% of your monthly salary is going towards EMIs.
3. You don't have a clear idea of how much total loan you have.
4. You are getting calls from loan apps every day.
5. You are unable to pay your full credit card bill.
6. You are taking loans for things you don't really need.
7. You have no money left at the end of the month.

Digital Loans: Easy, But Dangerous

In today's digital age, getting a loan is very easy. But its consequences can be very serious. It is extremely important for Gen Z to spend according to their income and think twice before taking a loan. Otherwise, the risk of getting stuck in a ₹40 lakh debt trap on a ₹30,000 salary is very, very real.