A Study of Spending More, Saving Less -The Dual Impact of EMI Credit on Indian Households

Abstract

The growth of Equated Monthly Instalment (EMI) credit systems in India has changed how households spend their money. This change raises questions about how EMI affects financial stability. This study looks at how EMI usage affects how Indian households behave when spending and saving money. We focus on how EMI leads to people spending more and saving less. Data has been collected from 53 different individuals. We found out that EMI makes it easier for people to buy things. It also leads to less savings for many people. Some people know they should save. They save less because of EMI payments. This is a behaviour. Most people think it is safe to spend more than 20-40% of their income on EMI. This shows they know there is a risk, with credit. They still use it. Our findings match what other studies have found about credit and spending. We also looked at why people make certain choices and how they feel about EMI. In the end we found that EMI helps people buy things they need. It can also be a risk. It affects how households make decisions in complex ways. We need to make people more aware of how to use credit. This way people can balance spending now with saving for the future.

Introduction

People in India are increasingly relying on EMI (Equated Monthly Instalment) schemes due to easy access to digital credit, which has changed spending and saving behaviour. The literature shows that while EMIs make expensive goods more affordable and boost consumption, they often reduce household savings and increase debt burdens. However, findings are mixed, with some studies noting that EMIs can also support planned purchasing and financial flexibility.

Existing research highlights that manual and traditional financial behaviour is shifting toward credit-driven consumption, especially among younger and urban populations. Many studies confirm that higher EMI commitments generally lead to higher spending and lower savings, though the extent varies across income groups, regions, and financial awareness levels. Some work also points out that financially less literate individuals and lower-income households are more vulnerable to overusing EMI credit.

Despite extensive quantitative evidence, a key gap remains in understanding why people choose EMI even when it affects savings negatively. Most studies focus on outcomes rather than behavioural and psychological drivers, such as lifestyle aspirations, social influence, perceived affordability, and risk tolerance. The concept of a “safe EMI-to-income ratio” is also underexplored.

The current study addresses these gaps using a small survey (53 respondents, mainly young students and adults) to examine EMI awareness, usage reasons, and its perceived impact on spending and savings. Results show high EMI awareness (96%), strong preference due to affordability, and mixed perceptions of impact—many believe EMIs help manage expenses, while others report increased unnecessary spending and reduced savings.

Conclusion

This is the study which shows that the EMI in India has two major effects: it helps people buy things as ease, but it also creates financial trap. If we take positive side of this report, EMI no doubt allows people to buy goods immediately without thinking of saving up the money. If we take negative side of this report, Paying EMI let people leave with less money to save it for the future. This really creates a conflict where people want to save money, but can’t. Our core finding is that EMI is more about the psychological factor than logical planning. People focus on getting things easily and feeling like that they had given small payment which they think are affordable. EMI is neither completely good nor bad: • It is helpful when planned carefully within a budget. • It is harmful when used for impulsive buying and borrowing too much. As Indian is a developing nation and as economy that relies more on credit, the main challenge is no longer getting loans, but using them from more responsibility, WHY? to ensure financial safety which helps people make better decisions, education, and responsible lending rules.

References

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Copyright

Copyright © 2026 Dr. T. Kishore Kumar, Akshat Saxena, Muskan Dogra, Nandana Beneesh, Gagana Jithesh. This is an open access article distributed under the Creative Commons Attribution License, which permits unrestricted use, distribution, and reproduction in any medium, provided the original work is properly cited.