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How to Get an Education Loan With a Low CIBIL Score?

October 12, 2020 •

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One of the crucial components of education loans is when you want to study abroad. There are many prerequisites for using the loan, and your CIBIL score is the most important of them. In other words, the relationship between your credit score and the loan is definite, and it is not inaccurate to say that your credit score is a factor that makes or breaks your overseas study loan. However, keep your hopes up because we are going to detail you on how to get an education loan with a low CIBIL score.

So what is a CIBIL Score? A three-digit number with any value between 300 (lowest CIBIL score) and 900 highest CIBIL score) is the Credit Score or CIBIL Score. This value is determined based on the details found in your CIR and is your credit-worthiness measure. During the loan appraisal process, the lenders use this ranking. A higher score shows that you are most likely to repay the loan on time. Thus, your chances of getting the loan are increased. On the other hand, a lower score means that you are less likely to repay the loan on time and have greater chances of defaulting on the credit and are a more risky borrower. This, therefore, reduces your chances of taking advantage of the loan.

The CIBIL algorithm calculates the CIBIL credit score based on 258 separate variables, each having equal weight, based on the CIR report and six-month historical financial data. The report gives you an analysis on whether you’re eligible to get a loan for low CIBIL score or not.

Factors Influencing Your CIBIL Score

There are several factors that can affect the process of getting an an education loan with low CIBIL score, a few of which include:

• Repayment history of the applicant.

• Balance of credit.

• Amount of time that the credit was used.

• Fresh loans-applied / taken.

• Mix credit.

These above factors when assessed, if they demonstrate a poor performance, then you will be in the low CIBIL loan category. You can always take measures to improve your credit score and maintain it in order to secure a loan.

How does the CIBIL score impact loans for education?

Statistics suggest that, on average, 90% of loans are given to borrowers with a score above 750 with the highest CIBIL score being 900.

Having a decent credit score has its advantages:

• Lower interest-average rate

• Quicker clearance and fewer paperwork

• Higher amount of loan

• Higher cap on cards

• Longer stay

So, it is a critical factor in the loan approval process when it comes to getting an educational loan with a low CIBIL score.

If you have a decent CIBIL (credit score) ranking, most banks provide you with feasible interest rates on educational loans. It will be troublesome for a person with a low CIBIL loan score to use loans from their bank for education.

Tips To Get An Education Loan With A Low CIBIL Score

• Often, because of some technical error or as a mistake by the bank, your CIR can represent a problem even though you have not defaulted.

• Delayed payments and defaults are a strict no-no since they affect your score badly.

• Avoid maxing out your credit cards by using the highest credit card limit. This will help in fetching you a loan with low CIBIL score.

• Do not submit too many short-term credit cards or loans as it will do your credit score more harm than good as it is perceived to be a credit hungry action.

• The right source that specializes in student loans should be contacted.

• Non-banking Financial Companies’ loans are more lenient towards credit ratings and have issued loans to individuals with a CIBIL score of 650. The downside to this is that they charge higher interest rates in contrast.

• Legitimate collateral in the form of a property will assist you in getting an education loan with a low CIBIL score.

• It is advisable to avoid approaching larger banks if your score is below 650. When you apply for a loan, lenders will always pull your CIBIL data, and these scores adversely affect your CIBIL study.

• The ones you can target with a limited CIBIL credit rating are a Non-Banking Financial Business (NBFC).

• Also, if you have a real reason for a low CIBIL score, lenders can often take your reasons into account and lend you a loan for low CIBIL score at reasonable interest rates.

• When applying for a loan, all your qualifications need to be in order.

• Most banks would prefer to give an education loan with a low CIBIL score to those people who have stayed at their current address for more than two years.

Does credit for education affect CIBIL? The answer is yes, since they are just like any loan and have to be repaid to maintain a good CIBIL score, your education loan will significantly impact your CIBIL score. The only difference here, though, maybe that it will only be paid after the course (education) is completed, and employment is obtained.

Education loans are also reported to CIBIL, like other loans, and are reflected in your credit report. Depending on your repayment conduct, this can positively or negatively affect your credit score. Besides, your credit score would be negatively impacted by the non-repayment of educational loans.

FAQs

1. Is an education loan linked with a CIBIL score?

Yes, education loans are linked with CIBIL scores. Lenders use CIBIL scores to assess the risk of lending money to a borrower. A higher CIBIL score indicates that the borrower has a good credit history and is more likely to repay the loan on time.

2. Does loan rejection affect CIBIL?

Yes, loan rejection can affect CIBIL scores. When a lender rejects a loan application, they will send a query to CIBIL. This query will be reflected in the borrower’s CIBIL report for a period of 12 months. However, the impact of a loan rejection on CIBIL scores is usually minor and will not have a long-term impact.

3. What is the minimum CIBIL score for an education loan?

The minimum CIBIL score required for an education loan varies depending on the lender. However, most lenders require a CIBIL score of at least 650 for education loans.

4. What does ‘NH’ or ‘NA’ mean in the CIBIL score?

NH stands for “No History” and NA stands for “Not Applicable”. NH is used when the borrower does not have any credit history. NA is used when the borrower’s credit history is not available to CIBIL.