Gen Z’s First Loan Could Make Or Break Their Financial Future—Here’s Why Credit Knowledge Is Key

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New Delhi: In today’s world, money can move in seconds with a tap on a phone. Gen Z, born in the age of smartphones and UPI, is one of the most financially aware generations. They use investing apps, track spending with budgeting tools, and follow finance influencers online.

But there’s a gap: many lack credit literacy—the know-how to use loans and credit wisely.

Access to Credit ≠ Readiness for Credit
Digital lending and fast approvals have made getting loans easier than ever. But getting credit isn’t the same as knowing how to handle it.

For many in Gen Z, their first loan shapes their financial identity. Your credit score plays a huge role in your future—it affects whether you get loans, the interest rate you pay, your credit limit, and even things like renting a house or landing a job. A strong score can open doors, while a poor score can hold you back for years.

The Risks of Borrowing Without Knowledge
Many young borrowers enter the credit system without proper guidance. They often rely on short social media videos for advice. While quick tips make finance seem simple, they usually don’t explain important details like interest compounding, repayment schedules, or credit utilisation.

Credit Literacy = Financial Power
Banks, lenders, and fintech platforms need to go beyond just giving loans. They should also teach first-time borrowers how loans work and how repayment affects their credit history.

For example:

Offer small, easy-to-manage loans with clear terms.

Add tips inside apps to explain how credit scores change with repayment behaviour.

Turn every borrowing experience into a learning opportunity.

From Giving Loans to Giving Knowledge
To truly help Gen Z, India must move from just “giving access” to “teaching first.” This means:

Explaining Credit Scores – What they are, how they’re calculated, and how to improve them.

Encouraging Responsible Borrowing – Helping people check if they can repay before taking a loan.

Promoting Timely Payments – Showing why paying on time keeps your credit healthy.

Warning Against Scams – Educating about fake lenders, debt traps, and checking your credit report regularly.

Building a Strong Financial Future
Credit literacy is everyone’s job—schools, lenders, fintech companies, and policymakers. Gen Z’s tech skills are a big strength, but they need credit knowledge too. That way, their first steps in the financial world will be smart, confident, and sustainable.

Three Pillars for Change
Make Credit Literacy Part of School Curriculum
Financial education should be as important as maths or science. Students should graduate knowing how credit works and how to use it wisely.

Use Technology to Teach, Not Just Lend
Fintech apps shouldn’t only give loans—they should explain interest, repayments, and scores in real time.

Borrowing + Understanding = Long-Term Success
Gen Z already borrows. With the right knowledge, they can borrow smartly, build good credit, and create a secure financial future.