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CIBIL Score: Education Loan

Haven’t loans made our life easier? Indeed, they have. They provide us with financial leverage that extends beyond our earnings, be it home loan, car loan, personal loan or education loan. More and more people have an option of good and quality education, which he/she may not able to afford without having to borrow money. And currently, in India, the process of taking education loan is simple and hassle-free. Most of the banks provide you with feasible interest rates on education loans provided you have a good CIBIL (credit score) rating. A person with low CIBIL score will find it difficult to avail loan for education from his/her bank.

How to get education loan with bad CIBIL score?

A good CIBIL score is essential to get any loan from the bank and obtaining a loan with a low score would be a difficult task. The below-mentioned tips can help you to get a loan with low/bad CIBIL score.

In case your score is below 650, it would be advisable to avoid approaching larger banks. This is because lenders will always pull your CIBIL data every time you enquire for a loan and these scores adversely affect your CIBIL report.
A Non-Banking Financial Company (NBFC) are the ones who you can approach with a low CIBIL credit scores.
Also, in case you have a genuine reason for low CIBIL score, lenders may sometimes consider your reasons and lend you a loan with appropriate interest rates.
All your credentials need to be in order while applying for a loan.
Most of the banks will prefer giving a loan to the individuals who have stayed at their current address for more than 2 years.
Also, it is advisable to apply for a secured loan as most of the banks will not want you to obtain an unsecured loan from them.

Does education loan affect CIBIL?

Yes, your education loan can have a great effect on your CIBIL score as they are just like any loan and have to be repaid to keep up a good CIBIL score. However, the only difference here could be that it can be paid once he/she completes the course (education) and gets employment.

Also, just like other loans, education loan is also reported to CIBIL and gets reflected on your credit report. This can have a positive or a negative impact on your credit score hugely depending on your re-payment behavior. Besides, non-repayment of education loan will adversely affect your credit score.

What is the required CIBIL score for obtaining an education loan?

Let us take various scenarios for CIBIL scored required to obtain an education loan.

When it’s a fresh start : Students who are applying for a loan for the first time (with no previous credit report) and are dependent on parents can get a loan without much complications provided if the loan is less than INR 4 lakhs. However, in such cases, a working parent may be asked to step in as a joint applicant. Also, in case you have an existing credit line, such as a credit card and you as a student is applying for a loan with an amount above INR 5 lakhs, a CIBIL score of above 750 is required.

The CIBIL score of your parents : While applying for a loan for over INR 5 lakh the CIBIL score of your parent who may step in as a guarantor will become vital. The lender would want to see the credit history and capability to repay the loan on your behalf.

Your First Chance to build a good credit score : In case you have never applied for a loan before and it’s your first time, this is a very chance to build a good credit score. One can take this as an opportunity in building a good credit history. Besides, always remember that non-repayment may botch up your credit report and impact your chances of getting credit in future. Note: In most of the cases, you or your parents have a minimum CIBIL score of 75O is required by the bank. But some may also accept less than 750 scores depending on various factors.

Other Reasons for Rejection of Education Loan

Following are some of the other reasons for rejection of education loan:

Poor academic performance : In case you have got admission in a reputed college, but under management quota due to your poor academic performance, then there is a possibility that you may not fit into the bank’s eligibility criteria.

College Recognition : Denial chances for loan education are higher in case you are planning for an admission in a college which is not well recognized and has poor placement record. And if you get admission in reputed colleges chances are higher for loan approvals.

Course applied for : In case you are applying for management, engineering or medicine colleges where there is a chance of potential earning after completion of your course, then the chances of getting a loan are higher.

Fake documents : If the documents provided by you such as the mark sheet, college approval letter etc. are forged, there are higher chances that your application may get straight away rejected.

Loan amount : Guarantee of the joint borrower is a must while applying for a loan amount which is greater than INR 7.5 lakhs. And if you are unable to submit this requirement to the bank they may disapprove of your application. However, in case the amount is less than INR 4 lakh there is no need to submit any guarantee, but guardian or parents are required to be your joint borrower.

Citizenship : Banks will deny your application if you are an NRI or a student from a foreign country.

Age limit : Many individuals apply for an education loan after taking some amount of experience. However, banks may still set an age criteria to less than 30 years of age.

FAQ's On CIBIL Score for Education Loan

I want to apply for an education loan but I do not have a co-signer. What do I do?

In case you do not have a co-signer, you may borrow a loan from the other resources as there are some lenders who may provide loan who do not have a co-signer.

What is the eligibility for education loan?

Applicant has to be an Indian National
He/She has to be in the age bracket of 16 to 35 years of age.
However, the above two being the basic eligibility criteria, few things may also depend on case to case basis.

What are the expenses covered by education loan?

It can be used for paying the following:

Library, lab fees etc.
For hostel or tuition fees.
For uniform, the cost of books.

Who can be my co-borrowers?

Parents/ Guardians can be co-borrowers for an applicant. Also, if the applicant is married his/her spouse can be a co-borrower.

Is there a maximum limit on an education loan that a lender can disburse?

Most of the lenders will have a limit of INR 10 – 15 lakhs for studies within India and the maximum limit can range anywhere between INR 20 -30 lakhs for foreign countries.

Does education loan reflect in the CIBIL report?

Yes, and defaulters might have to face the brunt as defaults on repayments of education loans would reflect in the borrower's CIBIL Report. This, in turn, may negatively impact his/her CIBIL score.