Bad loans or non-performing assets (NPAs), as they are called in banking parlance, associated with education loans have shown a steady increase in India in the last three years. According to official data released by the Indian Banks Association, as of March 2018, close to 9% of outstanding education loans were already in NPA territory.
As these NPA figures show a steady rise of bad loans, banks are becoming more cautious about disbursing loans, even to deserving candidates. The fact that the education loan sector is predominantly (95%) served by Public Sector Banks (PSBs) makes it even tougher for students to get loans as PSBs policies are greatly influenced by tightening government norms and regulations.
According to a January 2019 report published in The Hindu, stream-wise data on education loans revealed that students taking loans for pursuing nursing courses were top on the NPA list with 21.28% defaults; engineering courses were second at 9.76%.
So, if you are among those whose education loan application has been recently rejected, take heart because you are not alone. And don’t be discouraged because you can take another attempt with more information. If you are planning to take a higher education loan for the first time, we hope this article will help you and point you in the right direction.
Let’s find out the three top reasons why your education loan application may get rejected and what you can do to avoid that from happening.
Low Credit Score
You may wonder why you are expected to have a good credit score when you are just a student and have never taken a loan or owned a credit card before. Obviously, if you are not working, your credit score doesn’t matter but your parents’ or guarantor’s credit score is what banks will be looking at. In case your parents have not been good with repayments, or worse, defaulted in the past, there is a high likelihood of your education loan application getting rejected.
If you have taken an education loan or any loan in the past and you have a good record of repayments and enjoy a healthy CIBIL score, your chances for loan approval go up. So, before you apply for an education loan, try to improve your or your parent’s/ guarantor’s credit score first.
Accreditation of the Institution
If the educational institution that you plan to join is not recognised by the University Grants Commission (UGC) or All India Council for Technical Education (AICTE), your hopes of getting an education loan are dismal.
You should check the UGC and AICTE websites to verify if the institution is not among the list of unapproved universities or colleges. While UGC lists around 26 fake universities, AICTE has a mind-boggling list of 340 unrecognized institutions mentioned at their website. Many banks maintain a list of approved institutes and colleges on their website. You should check this list to reduce your chances of loan rejection.
Your past academic performance is not only your ticket to studying in a reputed college or institute, but it also increases your chances of getting an education loan. This is one of the most important parameters for approval used by most education loan providers.
If you are a brilliant student with consistent star performances in the past, your education loan approval rates jump considerably. Banks and non-banking financial companies (NBFCs) believe that someone with good academic performance has good chances of doing well in that course or program, getting a lucrative job and earning well. Therefore, they are faster to approve loans in this case. The opposite is also true. Average or below average students have increased chances of education loan applications getting rejected.
At a time when education loan NPAs is an all-time high and loan approval norms are getting tighter by the day, Finserv MARKETS is here to guide you through the entire process and get you the best deals at competitive interest rates and favourable terms with Bajaj Finserv Personal Loan for education.
Don’t worry if your education loan gets rejected. You can always opt for a Bajaj Finserv Personal Loan which can cover all your expenses; not just the admission and tuition fees. Studying abroad comes with a host of other expenses that includes travel, rent or hostel fees and other living expenses which are not covered by an education loan. You can instead apply for a Bajaj Finserv Personal Loan at Finserv MARKETS with attractive interest rates and flexible repayment terms. With a personal loan, not just your admission and tuition fees but all your living expenses are covered.
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