Banks offer education loans to individuals who desire to pursue a higher education. The CIBIL score is one of the main variables that banks assess when reviewing student loan applications. So, understand the significance of CIBIL score before looking for an education loan.
In this article, we provide detailed information on what a CIBIL score is for an education loan and how it affects your financing.
Education loans are vital in deciding whether to study abroad or in one's home country because they give critical financial support throughout the academic journey. The CIBIL score for school loans is an important factor influencing loan acceptance.
Co-applicants' credit histories are critical for student loans, with scores ranging from 300 to 900. A minimum CIBIL score of 700 or above increases the chances of obtaining a higher education loan. Those with scores less than 700 may encounter approval issues.
A higher CIBIL score enhances students' loan possibilities greatly.
The CIBIL score is one of the primary screening factors for lenders to check the applicant's creditworthiness. The importance of this score is higher in the case of an unsecured loan such as an education loan.
This is because unsecured loans do not have any collaterals like secured loans and therefore, are riskier for lenders.
A high CIBIL score, while clearing other eligibility criteria set by the lender, can help a student get a loan with the following features:
Lower interest rates on the loan
Higher education loan amount
A longer repayment tenure
Faster approval from the lender
A higher credit limit
For education loans, parents or guardians often act as co-applicants and banks consider their credit scores along with the student’s to approve the education loan.
In most cases, the student applying for the loan will not have any credit history or credit score. Hence, the credit score of the parent or guardian, who is the co-applicant, plays a significant role in education loan approval.
The credit score required by banks and financial institutions for education loans varies from one lender to another.
The recommended CIBIL score ranges are as follows -
Regardless of the sector, every lender considers a credit score of 750 and above to be good and creditworthy. A higher credit score also guarantees the applicants an immediate and hassle-free education loan to pursue higher education.
Educational debts have an impact on an individual's CIBIL score. Student loans are repaid in installments, which help build credit history.
While obtaining an education loan with a low CIBIL score is very challenging, there are many ways to improve one's chances:
Don’t Overuse Credit: Avoid exceeding the credit limit. Keep your credit utilisation between 30% and 50% to keep a decent credit score.
Repayment Management: It is crucial to make on-time payments on all credit and loan obligations. It will help increase your score and your chances of getting a loan.
Loan Rejections: If your loan application is rejected, don't apply for another loan right away. Each rejection reduces the credit score further.
Yes. Education loans are credit and they will have an impact on your credit score as well as the score of your co-applicant, just like any other loan.
The consistency of your repayment and your repayment behavior will either improve or reduce your credit score. Additionally, just like other loans, student loans are reported to CIBIL and appear on your credit report.
The only difference is, that education loans offer a Moratorium period, so the student can start repaying the loan after completing their education and securing a job. Be aware of your Moratorium period, and start repaying your education loan to avoid extra charges on your loans.
Banks and NBFCs consider CIBIL scores while approving education loans. In the case of education loans, the credit scores of the applicant(student), and the co-applicant(parent or guardian) matter. A good CIBIL score is required to get a higher education loan. And, repaying your education loan in time leads to a higher CIBIL score.
The maximum loan amount that can be granted to any individual depends on the bank's policies and the eligibility requirements that the applicant has satisfied.
Yes. You can opt for a co-applicant with a good CIBIL to avail an education loan.
Education loans, similar to other loans, require a good CIBIL score of 700 and above. Some banks and NBFCs also provide education loans for low CIBIL scores.
Yes. Your education loan is a form of credit so your CIBIL score will be impacted based on your repayment behavior.
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