How to Get an Education Loan for a Low CIBIL Score

Securing an education loan with a low CIBIL score is challenging but possible. By understanding the available options, such as applying with a co-applicant, offering collateral, or exploring government schemes, you can still fund your education. This guide provides practical solutions and tips to help you improve your chances of getting approved despite a low credit score.

Explore loan options tailored for borrowers with low CIBIL scores to fund your education dreams.

Key Takeaways

• You can still get an education loan with a low or bad CIBIL score

• Applying with a co-applicant or guarantor improves your chances

• Collateral-based loans are easier to get as they reduce the lender’s risk

• A CIBIL score of 700+ is preferred, but lower scores can work with extra security

• NBFCs may offer loans with flexible terms

• Government schemes like CSIS help students from low-income backgrounds

• You can also explore scholarships, savings, part-time work, or ISAs as alternatives

• Improving your credit score by paying on time and keeping credit utilisation ratio low can help

Yes, you can still get an education loan with a bad CIBIL score, although it may be more challenging. Lenders may impose stricter terms such as higher interest rates, reduced loan amounts, or additional documentation. 

However, applying with a co-applicant who has a strong credit score or offering collateral can help strengthen your application. It is strongly recommended to monitor your credit score regularly and review your credit report for any discrepancies. 

Improving your credit score over time not only increases your chances of loan approval but also helps you secure better terms. You can check your credit score or begin your credit improvement journey through Bajaj Markets.

A CIBIL score of 700 or above is generally considered good for obtaining an education loan with ease. It indicates that the borrower or co-applicant has a strong credit history. A score below 700 may lead the lender to request additional security, such as a co-applicant or collateral. 

A higher score increases the chances of quick approval and more favourable loan terms. Financial institutions also assess the repayment capacity, academic course, and institution reputation during evaluation. Maintaining financial discipline and clearing existing dues can help strengthen the credit profile.

To qualify for an education loan, lenders typically assess the following criteria:

1. CIBIL Score: A score of 700 or above is preferred, though loans may still be available with lower scores, especially if you have a co-applicant or collateral.
   

2. Course and Institution: Loans are easier to secure for students enrolling in recognised courses at approved institutions.
   

3. Age and Nationality: Applicants must be Indian citizens, generally aged between 18 and 35 years.
   

4. Repayment Capacity: Lenders evaluate your or your co-applicant’s income and financial stability.
   

5. Collateral: For loans above a certain amount, lenders may require collateral, such as property or fixed deposits.
    

Disclaimer: The eligibility criteria may vary depending on the lender's policies and the type of loan. It is advisable to check with the lender for specific requirements and terms before applying.

There are several ways to get an education loan with a low CIBIL score. Below are some effective options to secure a loan despite a poor credit history.

• Pledge Collateral

You can get a loan by offering an asset such as property or a fixed deposit. This acts as collateral and increases the bank's confidence, even with a low score. Lenders view this pledged asset as a safety net if the loan cannot be repaid, the bank has recourse to the collateral. This reduces the risk for the lender, which in turn can improve your approval chances, reduce the margin required, or enable better terms despite a weak credit history.

• Co-signer or Guarantor

Request a parent or guardian with a strong credit score to co-sign the loan. Their good credit history can support your application. The lender will assess the co‑signer’s income, obligations, credit score and past behaviour. Their good standing serves to override or mitigate your own low CIBIL score, making the loan application more acceptable. It’s essential for the co‑signer to be willing and prepared with documents and to understand the responsibility they’re taking on.

• Government-sponsored Schemes

Schemes like the Central Sector Interest Subsidy (CSIS) support students from low-income families. These help in getting loans despite a low credit score. For example, under the Central Sector Interest Subsidy Scheme (CSIS), eligible students from weaker income backgrounds receive an interest subsidy during the moratorium period. These schemes lower the cost of borrowing or reduce dependency on credit history alone, providing a pathway even for applicants whose credit score is less than optimal.

• Showcase Other Eligibility Factors

Highlight academic performance, admission to a reputed college, or future earning potential. These factors can strengthen your loan application. By highlighting these factors along with a stable income of co‑applicant or future earnings forecast, you shift the lender’s focus from just credit score to overall repayment potential and academic merit.

• Explore NBFCs

Several Non-banking Financial Companies (NBFCs) offer education loans with flexible terms. These are often easier to get with a low CIBIL score. Although interest rates or fees might be higher, opting for an NBFC allows a borrower with a low CIBIL score to gain access to the required funding and pursue higher education without being strictly blocked by the credit‑score hurdle.

Securing an education loan even with a low CIBIL score opens up the pathway to higher education and future career prospects. Below are the key advantages that such a loan can offer:

• It creates an opportunity to access funds for higher education, even when your credit history isn’t strong. If you secure a loan despite a low CIBIL score, you can cover tuition, living expenses or study‑related costs that might otherwise be out of reach.
  

• Having a loan in your name and repaying it responsibly helps you improve your credit profile over time. Proper repayments can show lenders you are capable of managing debt, which may enhance your standing with a credit bureau in India.
  

• You may gain access to income tax benefits in India on the interest paid on an education loan. Only the interest portion of the education loan is eligible for deduction under Section 80E of the Income Tax Act, and it reduces the overall cost of borrowing.
  

• It lets you make a strategic investment in your career potential. By availing funding despite a low score, you can pursue a course that may unlock higher future earnings and thus reduce the debt burden.
  

• With a co‑applicant, collateral, or government‑backed scheme in place, you may still obtain reasonable repayment terms and make repayments manageable, even when initial conditions are less favourable.

Taking an education loan with a low CIBIL score may introduce higher costs and increased risk of repayment issues. Below are the main drawbacks you should bear in mind:

• Borrowing with a low CIBIL score often leads to higher interest rates or stricter terms, which means the cost of borrowing increases and repayments may become more burdensome.
  

• If your future earnings or job prospects do not materialise as expected, you risk falling into financial stress or default, which can further damage your credit profile and impose long‑term consequences.
  

• Relying on a co‑signer or offering collateral means you may have to share responsibility or risk exposing assets, which can strain personal relationships or put valuable property at stake.
  

• Less favourable loan terms or higher repayments may limit your financial flexibility post‑graduation. This translates to fewer resources for additional investments, saving, or handling emergencies.
  

• If your credit profile remains weak, future borrowing (such as for a home loan or auto loan) may be negatively impacted, because lenders may view you as higher risk owing to your earlier low‑score borrowing.
   

Disclaimer: Loan eligibility and terms may vary based on individual circumstances, lender policies, and market conditions. It is advisable to consult with the lender for specific details.

Improving your credit score can enhance your chances of securing an education loan with favourable terms. Below are key strategies to help you boost your score:

• Pay bills and EMIs on time to demonstrate reliability in managing debt.
  

• Keep credit card usage low, ideally below 30% of your approved credit limit.
  

• Review your credit report regularly to identify and correct any errors.
  

• Maintain a balanced mix of secured and unsecured credit to improve your credit profile.
  

• Avoid making multiple loan or credit card applications within a short period, as this can negatively impact your score.
  

• Keep older credit accounts active to show a longer, stable credit history.

When a low credit score prevents access to a regular student loan, several alternative options exist to fund your education:

• Government Scholarships and Grants

These are awarded based on academic performance, family income, or social background. They do not depend on a credit score.

• College Financial Aid

Many colleges provide financial support through fee waivers or merit-based scholarships. Some also offer part-time employment opportunities on campus.

• Family Help and Savings

Financial assistance from family members or the use of personal savings can reduce dependence on loans. This also eliminates the burden of interest payments.

• Education Savings Plans

These long-term investment schemes are specifically designed for education. They do not involve any credit verification process.

• Skill Development Programmes

Such programmes provide low-cost training and resources. They are often more accessible for individuals with low credit scores.

• Income Share Agreements (ISA)

Private organisations cover educational expenses initially. Repayment begins later as a fixed percentage of future income.