A growing trend of using new credit to service existing loans during the festive season risks trapping households in a cycle of debt, according to recent data. With many households already near income limits, additional borrowing could exacerbate financial hardships, especially amid economic uncertainties.
Many borrowers are entering the festive season already stretched by debt, and fresh credit is increasingly being used not for spending alone but to keep existing repayments current. Business Today, citing Expert Panel data, reported that 40% of borrowers are taking new loans or using credit cards to pay existing EMIs, a sign that short-term borrowing is becoming a way to manage older obligations rather than to finance one-off purchases. The problem is not the loan itself, but the purpose for which it is taken: once new debt is used to service old debt, the repayment burden can compound quickly.
That risk is especially acute when monthly instalments are already consuming most of a household’s income. Business Today said 60% of borrowers in the data set have EMIs that either match or almost match total family income, leaving little room for essentials such as food, housing, schooling and medical bills. In that setting, an additional festive loan may look manageable at the point of approval, but it can crowd out everyday spending and leave families more dependent on borrowing.
The report also suggests that festive borrowing is only one part of a broader pattern of financial stress. Medical emergencies were the most common reason for borrowing, accounting for 26% of cases, followed by family and personal needs such as weddings and education at 22%. Business or job-loss-related needs made up 18%, while household and daily expenses accounted for another 15%. That means a seasonal loan is often not being layered on top of a stable budget, but added to an already fragile financial position.
The pressure can intensify quickly if income falls. Among borrowers who were unable to repay, Business Today said job loss or a cut in salary was cited in 31% of cases, followed by EMI obligations that were already too high at 28%. Multiple loans accounted for 19%, with medical or family emergencies making up 12%. The lesson is straightforward: before taking on festive credit, borrowers should total all existing EMIs, card dues and buy-now-pay-later commitments, then compare that figure with essential monthly outgoings. If the new borrowing depends on yet another loan later, it is no longer a convenience; it is a warning sign.
Holiday borrowing is not unique to India. A YouGov survey cited in related reporting found that 21% of US adults took on debt for Christmas spending in 2025, with credit cards the most common route. The pattern is similar: seasonal purchases can seem modest in isolation, but they become dangerous when they are added to pre-existing liabilities. That is the broader caution in the latest data: festive credit may solve a short-term cash-flow problem, but for households already under pressure, it can deepen a debt cycle that is hard to escape.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
