How to Get an Education Loan With Low CIBIL Score

How to Get Education Loan with Low CIBIL Score

Studying abroad can be a dream come true situation for any student. However, meeting every requirement to study abroad can be challenging for many. Specifically, meeting the financial requirements can be the most difficult part of your journey. Now, obtaining an education loan with low cibil score can be your golden opportunity, but you may lose it if you have a low credit score. No worries, we’ve got you covered; this article is all about securing an education loan even with a low credit score.

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Why is CIBIL Score Important for an Education Loan? 

Cibil score plays an important role in obtaining an education loan, as it determines the loan approval. A high cibil score can minimise your time for loan approval, and on the other hand, a low cibil score can lead to non-approval of loans. It is one of the most important and crucial factors to keep in mind when applying for an education loan with low cibil score. The credit history and cibil score of the co-applicant should be between 700-900. Cibil scores lower than 700 can put you in a difficult situation.

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What is the Minimum CIBIL Score required for an Education Loan?

If we talk about the minimum cibil score, it shouldn’t be lower than 700. For an education loan with low cibil score, your co-applicants minimum cibil score should be 700. 

How Is the CIBIL Score For Education Loan Calculated?

When you apply for an education loan with low cibil score, the approached bank will ask you for your credit report from the CIBIL department. This report provides your personalised credit report, and on that basis, cibil department will provide a score between 300 and 900. Your co-applicant’s cibil score may reflect negative or zero if you are a first-timer applicant. However, there are other essential factors that determine the cibil score for an education loan.

Here are some of the essential factors that we are mentioning below. 

  • EMI payments with consistency
  • Types of loans you have taken earlier
  • Utilisation of credit card limits
  • Current number of loans
  • Number of loans you have applied for
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Reasons You Need A Good CIBIL Score For Education Loan

If you are going to apply for an education loan, it is essential that you must have a good cibil score. A good cibil score makes you creditworthy to get a higher loan amount. Banks always prefer loan applicants with higher cibil scores instead of applicants with low cibil scores. With a good cibil score, you can get a better interest rate from the banks. However, if you don’t have a good credit score, don’t worry; it is not the end of the world. You can still get an education loan with low cibil score. 

Does Education Loan Affect CIBIL Score?

Yes, an education loan can meticulously impact your Cibil score. If you have a low Cibil score and somehow obtain an education loan, the repayments and non-repayments will directly affect your Cibil score. Paying loan amounts on time can increase your cibil score, and non-payment of loan amounts on time can leave you with a lower cibil score. So, yes it an education loan affects your Cibil score. 

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Challenges in Securing Education Loan with Low Cibil Score

If you have bad credit and still need to secure an education loan, you may find it difficult and experience several challenges. Here are some of the challenges that you may experience with a bad credit score. 

  • Loan applicants with bad credit scores are considered high-risk applicants. According to loan providers, a bad credit score is a direct indication of late payments, missed EMIs, financial problems, etc. All these factors make it really difficult to sanction a desired loan amount to such applicants. 
  • A bad credit score leaves you with fewer loan options. Traditional loan providers, such as mainstream banks, can deny your application, and you may be left with lenders with higher interest rates. 
  • Applicants with low credit scores require a co-signer with a good credit score to assure the loan repayments. This is the best way to obtain a required loan amount from any significant source. 
  • Applicants with bad credit scores are required to fulfil more stricter eligibility criteria. These criteria can be higher salary requirements for co-applicants and may require them to provide more prominent documents. 
  • Loan providers usually offer lower loan amounts to education loan providers. In such a situation, it can become really difficult for students to cover the entire expenditure of their education. Unfortunately, students may end up with more financial challenges, and they are required to look for other sources to fund their studies abroad. 

How to Improve Your Credit Score for an Education Loan

Education loan is something that determines your entire future. That’s why it is crucial to improve your credit score to secure an education loan. To improve your credit score, it is essential to have a co-applicant with a sufficient credit score. Apart from this, it is also important to pay your EMI on time and build a positive credit score

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Conclusion

Securing an education loan with low CIBIL score can be difficult, but it’s not something that is impossible. Check for government education loan schemes or subsidies that support students with financial difficulties. Some programs are designed to assist those with lower credit scores. Other than this, it is also crucial to follow certain rules that can help in improving your credit score. 

FAQ of Education Loan with Low CIBIL Score

What is a Credit Score, and how is it Calculated?

A credit score is basically a number that determines your credibility when taking any type of loan. There are certain factors that are used to calculate your credit score, such as your loan repayment history, length of your credit history, types of loans you have taken, etc. 

How does a bad credit score affect loan applications?

Loan applicants with bad credit scores are considered high-risk applicants. Loan providers can deny your application or offer higher interest rates. 

What challenges arise when applying for a student loan with bad credit?

Limited loan options, higher interest rates, and limited loan amounts are some of the challenges that can arise when applying for a student loan with a bad credit score. 

How can I review and comprehend my credit reports?

To review or comprehend your credit score, you can visit certain authentic websites to check your credit report. It is important to check to ensure that your account number and loan amount are embedded correctly or not. 

What steps can I take to rebuild my credit?

To rebuild your credit, it is important to make timely payments and avoid taking so many loans at one time.  Try to repay your loan within its tenure. 

What expenses does an education loan cover?

An education loan usually covers the charges of your university fees, tuition fees, study materials and living expenses. 

What is the minimum CIBIL score for an education loan?

To obtain an education loan, the minimum cibil score should be 700.  A CIBIL score usually ranges from 300-900; a credit score lower than 700 can not be considered for an education loan in the first place. 

Is there a maximum limit on education loans?

The maximum loan limit for Indian students who want to study abroad can vary between 15 lakh and 25 lakh. This amount can increase depending on your loan provider and your eligibility criteria. 

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