CIBIL Score For Education Loan

CIBIL Score for Education Loan

Know All About the Importance and Benefits of Credit Score for Study Loan

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You've probably heard the terms 'CIBIL Score' and ‘credit history’ a lot. A credit score is a numerical representation of your creditworthiness. A 3-digit number, it ranges from 300 to 900, and this score indicates to banks and financial institutions your capacity to repay the amount borrowed. 

 

For instance, when a person approaches a bank to finance their dream car, they are denied a loan despite meeting most of the criteria. One of the reasons for the bank’s refusal of a car loan is a bad credit history, which means a score below the minimum requirement. Good credit history is related to a good CIBIL credit score, which in many cases can be a factor in the acceptance or rejection of a car loan application, likewise, the CIBIL score for an education loan is equally important.

Minimum CIBIL Score for an Education Loan

For an education loan, the minimum CIBIL score required is 685. Even so, government banks occasionally might accept a CIBIL score of less than 685 if it is related to a credit card and isn't too serious. On the other hand, the majority of NBFCs operating in India require co-applicants and loan applicants to always have a CIBIL score of at least 700.

Why CIBIL Score is Important for an Education Loan

Education loans are one of the most important factors when choosing to study abroad or even in the home country. Today, as the cost of higher education increases, education loans can be your lifeline and help you at every stage of your financial need along the way. However, there are many requirements to get a loan, the most important of which is the CIBIL score; in other words, there is a relationship between a CIBIL score and an education loan, and it is safe to say that your CIBIL score is a determining factor in your student loans.

 

The credit history of the applicant and co-applicant is one of the most significant aspects of an education loan, the score may generally fall between 300 and 900. Although a minimum CIBIL score for education must be 750 or higher as it is considered ideal for obtaining a higher degree, loan approval woul be difficult for applicants with CIBIL scores under 600.

 

A student's CIBIL score for a education loan may be important, but if they do not have one, the lender will base their loan terms on the CIBIL scores of their co-borrowers. A student's likelihood of receiving financial aid can be increased by having a high CIBIL score and passing the lender's other eligibility requirements.

How Your Credit Score Impacts Your Student Loan

If you’re thinking about whether an education loan will affect your CIBIL score or not, then yes. Just like other loans, education loans have an impact on your credit score if they are repaid on time; if they are paid late, your score may suffer. The majority of student loans are instalment payments, which you pay back over a predetermined amount of time. As a result of the lender reporting this to credit agencies, you start to build up a history.

 

Every time you make a payment on time, you'll start building a strong track record of handling credit however, for students looking to get an educational loan to study abroad, the following CIBIL score ranges are advised:

Range

Loan Probability

300-599

If your CIBIL score is in this range, you must review your financial documents and pay close attention to any pressing problems that might be the root of your low CIBIL score. Most financial institutions consider a CIBIL score of less than 600 to be extremely bad, which reduces your chances of being approved for an education loan.

600-749

People with a CIBIL score in this range are still eligible for an education loan. However, most financial institutions and NBFCs are quite careful about loan applicants meeting the minimum CIBIL score for education loan requirements.discob

750 and above

Those with CIBIL scores of 750 and higher won't have any trouble receiving an education loan. Lenders might use this CIBIL score to assess the co-applicants and specific applicants’ financial dependability.

How to Improve Your CIBIL Score for an Education Loan

Here are some factors of your low CIBIL score as well as recommendations for how to improve your CIBIL Score:

 

  • Overuse of credit limit: Utilising your entire credit limit indicates that you are unable to regulate your spending. Make an effort not to exceed 30 percent to 50 percent of your overall credit limit. This will reduce your credit use and have a good credit score.

  • Late and failed payments: If you consistently miss or delay payments on credit or loans, your CIBIL score suffers. Set up reminders to make regular payments on all borrowed funds, this will aid in ensuring a better credit score for future loans as well as better loan terms.

  • Rejected loan requests: If your loan application has been denied, wait before applying for a new loan. In such circumstances, there will be a greater likelihood of a new loan denial, as your credit score drops with each loan denial. Prioritise raising your credit score to qualify for loans. After doing this, you can submit an application loan with improved terms.

If you are wondering if there is any way by which you can get an educational loan with a low CIBIL score, then the answer is yes, but firstly let’s understand the process with an example.

 

If you have bad credit, you may still be able to get any other loan because the banks will hold as security collateral until you have repaid the entire loan amount plus interest, be aware that the process can be drawn out, and loan approval can be much more challenging. Additionally, you might only be presented with unfavourable loan terms and conditions. Some of them might have longer repayment terms or higher interest rates.

 

Similarly, with a poor CIBIL score, obtaining an education loan is challenging but not impossible. If your credit history is between 600 and 700, use these suggestions to apply for an education loan.

 

  • Payment of Current Bills on Time

It will be easier to get a loan approved if you have a track record of paying your current expenses on time, including energy bills, credit card EMIs, and credit card bills. Therefore, make sure you have cleared your existing bills before applying for an education loan.

  • Display Income Proof

A solid income will show the creditor that the candidate has the means to pay back the loan. Proof of income demonstrates the borrower's ability to repay even with a low credit score.

  • Request a Secured Student Loan

Your credit score will become a secondary consideration when applying for a secured college loan. The importance of the pledged property's worth cannot be overstated. If sufficient security is provided, a borrower with poor credit may be granted a loan.

  • Fix Credit Report Fallacies or errors 

Correcting the mistakes is the greatest way to make sure that your poor credit score doesn't destroy your prospects of acquiring a loan. There can be a typo or perhaps an error in the report. Every six months, check your credit record to make sure this doesn't occur again.

Things to Keep in Mind Before Applying for a Student Loan

The following four considerations will help you when you apply for a student loan to fund your study abroad experience.

 

1. It is essential to follow the proper advice and comprehend the university courses in their entirety before applying for an education loan.

2. Keep a track of the CIBIL score and its report to borrow funds from either a bank or a financial institution.

3. Always keep an eye on the amount borrowed and the rules that go along with it.

4. Always carefully consider interest rates and moratoria.

FAQs on CIBIL Score for Education Loan

  • ✔️How to check the CIBIL score for an education loan?

    You can easily check your CIBIL score for education loan online. You just need to register yourself on the official website of CIBIL to check your credit score and get a credit report. You can also check the score on the website of Bajaj Markets.

  • ✔️ What is a good CIBIL score range required for a student loan?

    750 and above is the recommended CIBIL score for receiving an education.

  • ✔️How to get an education loan for a low CIBIL score?

    If your credit score is less than 650, it may be wise to work on improving the score.

  • ✔️Does CIBIL score affect student loan eligibility?

    The likelihood of having your loan accepted increases with credit score, and student loans are no exception to this norm.

  • ✔️How to avail an education loan without CIBIL score?

    Not exactly, for an education loan, lenders want a minimum CIBIL score of 685. 

  • ✔️Does the education loan reflect in the CIBIL report?

    Yes, however defaulters may take the burden of the consequences since missed payments on student loan debt will appear on the borrower's CIBIL score.