Pursuing higher education is a significant milestone that often requires substantial financial investment. For many, this means obtaining an Education Loan to cover tuition fees, living expenses and other related costs. However, securing an Education Loan with a low CIBIL score can be challenging.
CIBIL score for an Education Loan
The CIBIL score, a credit score generated by the Credit Information Bureau (India) Limited, is a three-digit number that reflects your creditworthiness. Lenders use this score to assess the risk associated with lending money. A high CIBIL score indicates a good credit history and financial stability, while a low score suggests a higher risk of default.
While lenders prefer a high CIBIL score, a low CIBIL score does not automatically disqualify you from obtaining a loan. However, a score above 650 is considered favourable.
Securing an Education Loan with a low CIBIL score
- Collateral-based loans An effective way to get an Education Loan with a low CIBIL score is to opt for a secured loan. Banks offer secured Education Loans where you can pledge collateral, such as property, Fixed Deposits or other valuable assets. Since the collateral mitigates the lender's risk, they are more likely to approve the loan even if you have a low credit score.
- Co-applicant or guarantor Having a co-applicant or guarantor with a strong credit profile can improve your chances of securing an Education Loan. Parents or guardians often act as co-applicants, and their good credit history can offset your low CIBIL score.
- Government-sponsored schemes Axis Bank participates in various government schemes that make Education Loans more accessible. For example, the Central Sector Interest Subsidy Scheme (CSIS) provides interest subsidies on Education Loans for economically weaker sections and have less strict credit score requirements.
- Improving your CIBIL score If you have time before applying for an Education Loan, consider working on improving your CIBIL score. Timely payment of existing loans and Credit Card bills, reducing outstanding debt and avoiding new credit applications can positively impact your credit score.
Education Loan criteria
- Academic performance: Strong and healthy academic records can increase the chances of your loan application approval.
- Institution reputation: Loans for studies at prestigious and renowned institutions are often viewed more favourably.
- Course potential: Professional courses with high employability prospects, such as MBA, can improve loan approval chances.
- Repayment capacity: Lenders will evaluate your income and financial stability to ensure repayment capacity.
Steps to get an Education Loan
- Check eligibility: Ensure you meet the basic loan criteria set by the lender.
- Gather documentation: Prepare necessary documents, such as admission letters, identity proofs, income proofs and academic records.
- Apply: Fill out the loan application form and submit it along with the documents.
- Loan processing: Your loan application will be reviewed to assess your creditworthiness, along with other additional information.
- Loan approval and disbursement: If the loan application is approved, the amount will be disbursed directly to the educational institution.
Also Read: Types of documents required for Education Loans in India
Conclusion
Securing an Education Loan with a low CIBIL score is challenging but not impossible. By exploring options such as secured loans, co-applicants and government schemes, you can achieve your educational aspirations. With the right approach, you can secure the necessary funding to pursue your dreams, regardless of your CIBIL score.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
