Planning to take loan for first time? What should young borrowers check before signing up? Experts explain

Planning to take your first loan? Young borrowers should check EMI affordability, interest rates, loan tenure, additional charges and repayment terms before applying to avoid financial stress and manage debt responsibly.

When you decide to take your first loan, remember it is a major financial decision. It becomes even trickier when a young earner applies for a fresh loan, as they are just starting their careers and aiming to build financial stability.

Furthermore, it is a given that sensible borrowing at appropriate times can be immensely helpful, as it can allow borrowers to achieve their long-term financial goals, such as buying a home, pursuing higher education, seeking immediate medical treatment, or starting a new business. On the other hand, an unsustainable loan can put pressure on an individual's monthly finances for years.

Today, with rapid technological development, obtaining personal loans is much simpler due to the widespread availability of lending platforms. This makes the loan clearing process 'instant' with just a click. Due to this, young borrowers must be cautious and look beyond the seamless approval process and headline interest rate before committing to debt.

Having a clear understanding of the loan as a 'product' along with the long-term implications of failing to meet repayment obligations, defaulting or delaying payments in any way or form can result in shooting up the borrowing costs and make the entire borrowing experience unpleasant. This makes understanding one's repayment potential, past borrowing behaviour, and the objective behind the loan very important.

First loan: What should young borrowers check?

Vikas Chaudhary, Co-founder and CTO of Saralya, highlighted the importance of responsible borrowing, stating, "For young borrowers, the first loan should ideally be a step towards building long-term value, not just financing a lifestyle. TransUnion CIBIL's March 2026 report found that borrowers below 35 accounted for 58% of first-time borrowers in the December 2025 quarter, with personal loan originations in this segment rising 20% year-on-year."

Therefore, before taking their first loan, young borrowers should consider the following factors carefully, in order to ensure that a beneficial borrowing decision is made:

Avoid taking a loan beyond your repayment capacity

Chaudhary also clearly explained why young borrowers should avoid taking loans to fund lifestyle expenses, particularly when existing EMIs are already stretching their monthly income. The aim should be to reduce avoidable expenses and focus more on essential expenses such as business growth, medical needs, family well-being, and home renovations.

On this, he stated, "Borrowing for a home, education that improves earning potential or equipment for a business can support future growth. In contrast, taking loans for a new phone or vacation, especially when existing EMIs are already stretching income, can create a debt trap. For someone earning ₹50,000 a month, keeping total EMIs around ₹15,000 or lower can offer more breathing room, depending on essential expenses and savings. Financial discipline is not about avoiding loans, but using leverage to build a stronger future rather than pay for today's consumption."

In summary, before proceeding with your first loan, it is prudent to clearly understand the loan's need and objective. Further, in case of doubt, it is prudent to sit down with a certified financial advisor and plan repayment to avoid complications later on.