Education Loan With Low CIBIL Score- How Does It Affect Your Student Loan Process

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An education loan is probably the first step that many students take on their road to financial independence and like other loan applications, CIBIL score for student loan is taken into account by lenders as they review their education loan applications. Lenders check students' creditworthiness to evaluate their ability to repay the education loan.

Knowing the importance of the CIBIL score for education loan can help students immensely as the CIBIL scores of students and their co-borrower will determine whether their loan application will be accepted or get rejected.

Read this article to know what is CIBIL? How do CIBIL scores get calculated? What is the importance of the CIBIL score for an education loan and how to get an education loan with low CIBIL score?

Credit Information Bureau India Limited (CIBIL) is an American multinational group operating in India. CIBIL maintains all the records of all those who have ever taken any loan or even inquired about one. This information is sent to CIBIL by the banks and financial institutions in India and when needed, CIBIL provides this information to the bank. 

What is the Credit report?

There are four important areas of information on your credit report.

  • Personal: Name, Address, PAN no, Date of Birth, employment information
  • Credit History: Types of accounts, The date on which one opened the account, the credit limit, the account balance, payment history
  • Public Records: Garnishments, Foreclosures, Legal Suits and judgments
  • Inquiries: List of creditors who have accessed one's credit report in the past

How is the CIBIL score calculated?

Whenever a person approaches a bank or any financial institution for any kind of loan, then that bank or financial institution asks for the CIR (Credit Information Report) of that person from CIBIL which is their personalized credit history. Based on their past credit history, CIBIL gives them a score ranging between 300 (Worst)-900 (Best). For those who have not taken any loan yet, their CIBIL score will always show in negative or zero, which is nothing to be worried about.

There are mainly four factors to determine the CIBIL Score

  1. Repayment history - One's consistency with their earlier EMIs payment, how regular were they, and so on.
  2. A mix of loans - Different types of loans (Secured or Unsecured) they've taken in the past 
  3. Credit limit - Utilization of credit limit of the credit card or any credit line.
  4. Multiple loans at one time - The number of times they've taken or applied for loans in a short period.

Importance of CIBIL score for education loan

When you approach a lender for an education loan CIBIL score of both students and their co-borrowers is checked. For an education loan CIBIL score can make a difference but if a student has no CIBIL score then based on their co-borrowers CIBIL score, the lender decides the overall loan deal. Having a good CIBIL score along with having cleared other eligibility parameters set by the lender, can ensure a student to get 

  • a lower rate of interest 
  • a quicker approval from the lender
  • a higher education loan amount
  • a higher credit limit
  • a longer tenure

For study in India, different banks have different schemes as to how much they can offer to a student but what all government and private banks have in common is Central Sector Interest Subsidy Scheme (CSIS). Under the CSIS scheme, students can avail up to 7.5 lakhs without collateral as education loans. 

To apply for an education loan of up to 7.5 lakhs without collateral under this scheme, you would have to apply via the Vidyalakshmi portal. You can apply for 3 education loans from three different listed lenders at a time. This can be a time-consuming process as many times lenders do not process these loan applications on time and may delay loan applications for months.

You could apply for your education loan through Vidyaloans, an organization that helps students secure non-collateral education loans from Government banks up to 7.5 lakhs. They will assist you in getting the loan on time which is 12-15 working days after all the documents are submitted at the branch. 

Minimum required CIBIL score for student loan

The minimum CIBIL score required by the lenders for an education loan is 685. Although Government banks sometimes may accept a CIBIL score less than 685 if it's credit card-related and not-so-serious. Private lenders, on the other hand, are less flexible on CIBIL issues and generally reject the loan application if it is below 685. 

Banks will never accept loan applications if some serious issues are detected in the CIBIL report such as-

  • Loan write-off/ loan waive-off
  • Loan settled
  • Cheque bounces

How to establish a good credit history?

  • Pay all your credit card dues on time and in full. Late payments are viewed negatively by the lenders.
  • Do not use too much credit and always try to keep a buffer between the credit limit and the utilized limit.
  • Maintain a healthy mix of credit. 
  • Clear all the outstanding dues
  • Never miss any of the EMIs, in fact, do ECS (Electronic Clearing System) on it. This way one can eliminate the possibility of forgetting the monthly EMI payment.

How to get an education loan with low CIBIL score

Whenever the CIBIL score for an education loan is considered low, the best option is to apply for a collateral education loan from a Government bank. Private banks will mostly deny an education loan with low CIBIL score. 

Although lenders still do check the CIBIL score but paired with collateral, a low CIBIL score can be considered for an education loan given the CIBIL report shouldn't reflect any serious issues. When collateral is pledged to take a loan against it, the risk for the lender reduces as they have collateral in an event of default from which by auctioning it they can recover their money.

If you are looking for a non-collateral education loan of up to 7.5 lakhs to fund your higher education in India, then we recommend you to connect with our team at Vidyaloans. Our processing officer will assist you with the entire education loan process.

About the organization: VidyaLoans is an organization which helps Indian students in India to secure a non-collateral loan from Government banks up to 7.5 Lakhs. We have a dedicated team of professionals who assist students with queries and guide them throughout the loan process. Our Team at Vidyaloans is committed to sanction the best loan option suiting the applicant's profile and needs, in a stipulated time frame.