With a population of 37.7 crore, Generation Z (Gen Z) holds a significant and influential position in the Indian economy. This generation has an immediate and dynamic approach when it comes to managing finances. While many of them are first-time personal loan applicants, they use the funds strategically for both career and other requirements.

The process of applying for a personal loan for Gen Z, however, may be overwhelming. The knowledge of how personal loans work makes the process easier and more assured. This playbook equips you with the fundamentals of personal loans so that you can make informed choices.

Gen Z Borrowing Trends and Behaviour

Personal loans have become a significant financial instrument for Gen Z, which refers to the group of people born between 1997 and 2012. It is registering one of the highest rates in terms of personal loans. According to Paisabazaar’s consumer insight report, 30% of the Gen Z borrowers have used personal loans for travelling alone. In fact, as the latest CMI report by TransUnion CIBIL shows, 41% of first-time borrowers are Gen Z. Still, many lenders (banks & NBCs) perceive Gen Z as risky since they have little or no credit history. This is why it becomes essential to know how to borrow intelligently and avoid typical pitfalls.

When Does a Personal Loan Make Sense?

A personal loan proves helpful to young earners for many reasons.

• Emergency Expenses: Whether it’s a medical emergency or a personal crisis, they often come unannounced, and you may not have the funds available. A personal loan makes sense for covering medical bills, work tools, or family events.
• Pursuing Course or Developing Skills: A personal loan for Gen Z is perfect in terms of financing education or the development of skills.
• Personal Life Events: A personal loan is a way to finance big purchases or personal life events, such as buying a gadget or travelling, and pay in small monthly instalments.

Personal Loan Eligibility Criteria for Gen Z

Here are the eligibility criteria for DMI Finance personal loans.

Eligibility	Details
Minimum Age	23
Minimum monthly income	₹25,000/-
Employment type	Salaried and Self-employed
Minimum work experience	Not required
Minimum credit score	700+ for salaried 730+ for self-employed
Documents	Identity Proof (PAN, Aadhaar)    Address Proof (Utility bill, gas connection, electricity, or postpaid bills) Income Proof (Salary slips or Bank statement)

How can you improve your chances of getting a personal loan?

DMI Finance does not provide personal loans to individuals with a credit score below 700.  If your credit score is low, here’s how to improve your chances of getting a personal loan in future:

• Start with a Small Loan: Apply for a smaller amount, like ₹50,000, pay them on time and build a good credit profile that will help you to be eligible for a bigger loan amount in future.
• Use Credit Cards: Obtain a credit card that is secured against an FD to build credit. Use the card to make regular payments, and pay the bill on or before the due date.
• Use BNPL: You can use buy now pay later (BNPL) for small purchases and make the repayment on time. Gradually, it will help you improve your credit score.

Why a 700+ Credit Score Matters and How to Get There?

Your credit score is a summary of your credit report. It has a range of  300 to 900, with a score of 700 or above being good enough to be eligible to apply for a personal loan, as it indicates that you are responsible with credit.

How to Build or Improve Your CIBIL Score?

• Use Credit Cards: Use a credit card or a credit builder loan to start a credit history. Paying bills on time helps you establish good credit behaviour.
• Maintain Low Credit Utilisation: Avoid using over 30% of your credit limit to demonstrate good financial management and responsible borrowing.
• Avoid applying for Multiple Loans: Avoid applying for several loans or credit cards within a short time because the frequent hard inquiries will hurt your score.
• Automate Payments: Automate your EMIs, utilities, or subscriptions to never miss out on the payments.
• Health Credit Mix: Diversify your credit mix over time by using different types of credits and loans responsibly, including unsecured loans and secured loans.

How EMIs Work and are Calculated?

An EMI (Equated Monthly Instalment) is the fixed amount you make every month to repay a personal loan in the first instance. It includes both the principal and the interest. EMIs depend on three factors:

• Loan Amount: The amount you borrow.
• Interest Rate: The rate of interest imposed by the lender.
• Tenure: The time duration that you have agreed to pay the loan.

Suppose that you borrow ₹1 lakh at 15% interest over 3 years:

• Principal: ₹1,00,000
• Interest rate (per annum): 15%
• Tenure: 36 months

Based on these parameters, you will pay a monthly EMI of ₹2788 and a total interest of ₹33,831.

How to Apply for a Personal Loan?

Here is how to apply for a DMI Finance personal loan:

1. Install the App: Download the DMI Finance app from the Google Play Store or Apple App Store.
2. Log In: Enter your mobile number and confirm with OTP.
3. Enter Details: Enter your personal and employment information, including your name, income, job type, and address.
4. Select Loan Amount and Tenure: Select the amount of your loan (up to ₹5,00,000) and the term of your loan (up to 5 years).
5. Upload Documents: Provide your PAN card, Aadhaar, income evidence (salary slips or bank statements), and a utility bill for address verification.
6. Full e-KYC: Complete Aadhaar-based e-KYC.
7. Set Up Auto-Debit: Provide bank account details for automatic EMI payments.
8. Submit the Application: Finally, submit your loan application and wait for the approval.

If it approves, the loan amount is deposited into your account in a period of 24-72 hours.

A personal loan for Gen Z can be a smart way to meet financial goals, whether it’s funding a big purchase or building a credit score. When used wisely, it will help you achieve your financial goals and build creditworthiness as well. However, you must start small and borrow wisely to ensure an empowered financial future.

DMI Finance offers a simple, digital process with flexible loans up to ₹5,00,000, making it ideal for young borrowers. Use tools like the EMI calculator, follow the steps in this guide, and always borrow only what you can repay comfortably. Click here to apply for a personal loan.

Frequently Asked Questions (FAQs)

1. What’s the minimum CIBIL score Gen Z needs for a first personal loan?
DMI Finance offers personal loans to individuals with a minimum credit score of 700.

2. Can I get a personal loan without a salary slip as a self-employed or freelancer, Gen Z?
Yes, DMI Finance offers personal loans to self-employed individuals who can provide their bank statements as proof of income.

3. How do I calculate my EMI and total cost for a personal loan?
Use an online EMI calculator by entering the loan amount, interest rate, and tenure to estimate monthly payments and overall interest.

4. Who can apply to take a personal loan?
You qualify to apply for a DMI Finance personal loan if you are an Indian resident, aged 23-52 years,  have a minimum credit score of 700 and a monthly income of ₹25,000, either salaried or self-employed.

5. What is the maximum and minimum amount of loan I can apply for?
With DMI Finance, you can comfortably apply for personal loans from ₹50,000 to ₹5 lakh.

6. What factors decide the personal loan approval?
Your income, current debts, credit score, age, and job stability are all factors that the lenders consider when approving a loan.

7. How fast can a personal loan be approved?
With DMI Finance, you can receive the loan amount within 24-72 hours after the approval of your loan application.

8. What can I use a personal loan for?
Here are the purposes you can use a personal loan for:

• Medical bills
• Travelling
• Wedding
• Education fee
• Home renovation
• Business
• Shopping
• And many more.

9. What documents are needed to apply for a personal loan?
Usual documents that are necessary for personal loan applications are identity documents, address proof, and income documents (salary slips or bank statements).

10. What is a thin credit file, and can I take a personal loan with a thin credit file?
A “thin file” in credit refers to an individual’s credit profile with little or no credit history. Some lenders accept alternative proof, provide secured loans, or request a co-signer to aid in qualification.