Up to 45% of Salaries Spent on EMIs, Debt Payments
The percentage of people paying EMIs goes up from 69 per cent among entry-level earners to 80 per cent among mid-level professionals. However, among high-income earners it is a tad lower at 79 per cent.
Chennai: Salaried individuals allocate between 34 per cent and 45 per cent of their income towards servicing debts and on EMIs. While EMI share goes up with income levels, the share of money spent on necessities decreases with an increase in salary.
As per a survey by Perfios and PwC, salaried individuals allocated between 34 per cent and 45 per cent of their income to obligatory expenses, including housing loans, vehicle loans and personal loans. The entry-level earners spend 34 per cent on EMIs, emerging professionals 35 per cent, established earners 41 per cent, mid-level professionals 44 per cent and high-income earners 45 per cent. The survey also found that EMIs have increased for 42 per cent of respondents.
The percentage of people paying EMIs goes up from 69 per cent among entry-level earners to 80 per cent among mid-level professionals. However, among high-income earners it is a tad lower at 79 per cent. The percentage of people making loan payments reveals a slight upward trend from 72.11 per cent in Tier-3 cities to 74.17 per cent in metro cities.
The survey finds that with growth in income, the demand for credit support also increases as rising aspirations of individuals lead to increased spending on both discretionary and necessity expenditures, which eventually translates into obligatory spending. Further, higher living expenses related to their premium lifestyle choices, such as expensive travel budgets, premium education, and a preference for niche and higher-quality products and services also increase debt.
Lower penetration of loans among people with lower salaries and people living in smaller-tiered cities indicates that these individuals rely on alternative options due to challenges in the availability and accessibility of loan options.
Further, higher loan EMIs for people living in metros could be because of higher property costs leading to larger home loans, increased educational expenses, costlier medical and healthcare facilities, and higher maintenance costs associated with living in these cities.
Apart from loan payments, salaried people spend between 22 per cent and 44 per cent on necessities, which comes down with the increase in earnings. They spend 22 per cent to 33 per cent on discretionary expenses which comes down with increase in income levels.