Education loans bridge the financial gap between students and their dream of pursuing higher education. These loans make higher education affordable to many student by helping them cover their educational expenses. Lenders thoroughly assess the CIBIL score to process an education loan. Lenders have a minimum credit score requirement according to which they offer student loans. And getting an education loan with a low CIBIL score is quite difficult. 

In this article, we will explore the importance of a credit score for education loans. We have also included a few tips on how to get an education loan with a low CIBIL score to help you in your student loan process.

Importance of Credit Score for Education Loans

Education loans have become the primary source of funding for many students to fund their higher education. Whether you are planning on studying abroad or in India, education loans can help you cover the expenses associated with your studies. Hence, the demand for education loans for significantly increased in the last decade. 

One of the major factors that affect these loans is the CIBIL score, especially for unsecured education loans from private lenders. The CIBIL score of the student and their co-applicant plays a vital role in their education loans. Having a low credit score can affect your education loan terms, such as the interest rates, loan tenure, and EMIs, which we will learn about further in this blog. Here’s why a credit score is important for education loans:

Lenders Assess Credit Score for Education Loans

Lenders thoroughly assess the credit scores of both the student and the co-applicant for the education loan process, especially private lenders. Assessing the credit score of individuals helps lenders understand the risk of lending money to them. Private lenders are very strict about their CIBIL education loan eligibility, as they are more specialized in providing unsecured education loans. Lenders can decide the important education loan terms and conditions, including the loan amount, interest rate, and repayment terms, based on the CIBIL score of the applicants. 

Impact of Credit Score for Education Loan Approval

Understanding the impact of CIBIL on education loans is important as it plays a major role in the approval of these loans. Every lender has their CIBIL score education loan eligibility criteria according to which they approve student loans. Lenders can even reject the education loan applications that do not meet their CIBIL score requirements. This is how the CIBIL score impacts education loan approvals.

Banks can refuse to give you a loan because of a low credit score. However, when you apply via WeMakeScholars. With our experience and knowledge, we can maximize a student’s chance of securing funds even with a low CIBIL score. Do reach out to us by requesting a callback.

CIBIL Score Education Loan Eligibility Criteria 

One of the most common questions that many students have about credit score for education loans is ‘What is the minimum required CIBIL score for education loans? The minimum CIBIL score for education loans varies by lender. However, a minimum credit score of 685 or higher is accepted by most lenders for education loans. And you can get a secured education loan from SBI with a CIBIL score as low as 591. 

This requirement can vary based on several factors, including the student's academic profile, the field of study, the preferred university, and the co-applicant’s financial status.

Impact of Low Credit Score for Education Loans

Having a low CIBIL score significantly impacts education loans by affecting the loan terms. Lenders can even reject an education loan with a low CIBIL score. However, the impact of a low credit score for education loans varies depending on the collateral involvement in the loan. Here’s how a low CIBIL score affects unsecured education loans from private banks and secured education loans from public banks:

Private Education Loans for Bad Credit Score

Private education loans refer to the unsecured education loans from private lenders in India, i.e., private banks and NBFCs. As we have already discussed, private banks and NBFCs are very stringent about their CIBIL score requirements, as they primarily offer unsecured education loans. 

Since these loans are offered based on the income and creditworthiness of the co-applicant, an education loan with low CIBIL scores increases the risk for these lenders. Private education loans with bad credit scores affect the loan terms, such as a limited loan amount and increased interest rates. Private lenders reject student loan applications if any major defaults, such as loan write-off or settlement, are found in the credit report.

Secured Educational Loans with Bad Credit Score

Public banks are not as strict as private lenders regarding their education loan CIBIL score requirements. Public banks are more specialized in offering secured education loans to students. The involvement of collateral reduces the risk of the lender. However, public lenders still assess the credit scores of the students and co-applicants to understand the risk of offering a loan to them. Public banks also do not provide education loans if major defaults are found in the credit report. However, deviation can be taken in public banks for such issues if the default amount is less than 50 thousand rupees.

Tips to get an Education Loan with Low CIBIL Score

While obtaining an education loan with a low CIBIL score can be very difficult, it is not impossible. Here are a few strategies that can help you get an education loan even with a low credit score:

Improve the Credit Score

The most common way to get an education loan with a low CIBIL score is by improving the CIBIL score. Check the reasons for the low credit score in the credit report. Look for any defaults such as late payments or credit card issues. Rectify the issues by contacting your lender to improve the credit score. 

Wondering how to improve your credit score? When you’re planning to apply for an education loan but have a low CIBIL score, WeMakeScholars can help you. When you apply for an education loan through us, we have a dedicated team that can help you rectify your CIBIL score. So, apply for an education via WeMakeScholars by Requesting a Callback today, so that our team can help you get an education loan even with a low CIBIL score.

Opt for a Collateral Education Loan

One of the most effective ways to get an education loan with a low CIBIL score is to go for secured education loans. As we have already learned, secured education loans from public banks can be flexible with their student loan CIBIL score requirements. 

Involving collateral in the loan reduces the risk for the lender. So they can offer education loans to students even if their credit score is low. This is why you should get a secured education loan from a public bank when your credit score is low.

Look for an Alternate Co-applicant

If the CIBIL score of your co-applicant doesn’t meet the minimum requirement for the Student, you can look for an alternate co-applicant. You should look for another co-applicant with high income and a credit score who meets the CIBIL requirement of the lender to get an education loan.

Include Additional Co-applicants

Another solution for this issue is to add additional co-applicants to the loan application. Depending on the lender, you can add more than one co-applicant to the student loan application. By including multiple co-applicants, lenders will consider the combined income of all the co-applicants in the loan application. This improves your chances of getting an education loan.

Conclusion 

Obtaining an education loan with a low CIBIL score can be very challenging without the right information. Having a low CIBIL score significantly impacts education loans by affecting the interest rates and loan limits. Students should understand the importance of a credit score for education loans while applying for one. Hence, this article explores the importance of a credit score for education loans, along with CIBIL score eligibility for education loans. We have also provided several strategies you can use to get an education loan even with a low CIBIL score.