How to Get an Education Loan with a Low CIBIL Score? | GyanDhan

Published date: 08 Feb 2019 Updated on: 06 Apr 2020 Education loan is one of the crucial components when you choose to study abroad. In the present day and age, the cost of higher education is skyrocketing, and hence, a study loan can be your savior, which will help you at every stage of your financial needs during your course. However, to avail the loan, there are many pre-requisites and the most critical of them is your CIBIL score. In other words, there is a definite relation between your CIBIL score and education loan, and it is not wrong to say that your credit score is a make or break factor for your study loan. Looking For Lowest Rate Abroad Education Loan? Fill this form and get in touch with an expert What is CIBIL? The CIBIL (Credit Information Bureau (India) Limited) is India’s first Credit Information Company. All the banks and financial institutions in the country are mandated to send credit card payment and loan history of an individual to CIBIL each month. CIBIL then collects and maintains the Credit Information Report (CIR) to generate the Credit Score. What is CIBIL Credit Score? CIBIL Credit Score or CIBIL Score is a three-digit number that can have any value between 300 and 900. This value is calculated based on the information in your CIR and is an indicator of your credit-worthiness. The lenders use this score during your loan evaluation process. A higher score indicates that you are most likely to repay the loan on time and thus, there are fewer chances of defaulting the credit and hence, you are a less risky borrower. Thus, it increases your chances of getting the loan. On the other hand, a lower score means you are less likely to repay the loan on time and have higher chances of defaulting on the credit and are a riskier borrower. Thus, it lowers your chances to avail the credit. How is the CIBIL Score Calculated? Depending on the CIR report and six month’s historical financial data, CIBIL algorithm calculates the CIBIL credit score based on 258 different variables each having an appropriate weight. Several factors related to your financial credit history are responsible for deriving your score. Factors affecting CIBIL Score: There is a range of factors that can affect your CIBIL credit score. The applicant’s repayment history. The credit balance. Length of time of using the credit. New credit – applied/taken. Credit mix. How does CIBIL score affect education loan? Statistics show that on an average, 90% of the loans are granted for the applicants with the score above 750. The higher the score, higher is the probability of getting your loan approved and study loan is no exception to this rule. Having a good credit score has its perks that include: The lower rate of interest Quicker approval with less documentation Higher loan amount Higher card limit Longer tenure Thus, needless to say, when it comes to education loans, it is a crucial factor in the loan approval process. Majority of the students might not have taken a loan or credit card in the past and thus don’t have any credit history. In such cases, when they apply for an education loan, the lender checks the credit history of the guarantors who usually are, their parents. Thus, if the parents have a poor CIBIL score, there are high chances that the loan can be denied. How can you improve your CIBIL Score? If you have a low credit score, you can take the following measures to get it on the right track. An excellent CIBIL score is imperative for getting an education loan and opening the door to your higher education in an esteemed institute. If you check your credit score and take corrective actions as mentioned above, you can improve your CIBIL score right in time and avail your education loan easily and with low interest as well. Also, there are education financing websites like GyanDhan which are specifically meant to help students avail the education loans irrespective of their CIBIL score and can help you pursue your study abroad. Check your CIR, and CIBIL scores regularly - The first step is to check your CIR and credit score time to time on the CIBIL website. Sometimes, your CIR might reflect an issue due to some technical error or as a mistake by the bank even when you have not defaulted. If you have a valid point, you should report the issue with CIBIL as soon as possible and get the error rectified. Clear the dues well in time – Late payments and defaults are a strict no-no, as they badly affect your score. Thus, make all the payments well within time. It will help improve your score. Do not be a guarantor to a less creditworthy individual – If such a person defaults, then it will affect your CIBIL score. Prefer a mixture of credit – You should avail a mix of credits with a higher percentage of secured loans as compared to unsecured loans. Avoid utilizing maximum credit card limit – Avoid maxing out your credit cards. It is advisable to use only 40-50% of your available credit limit. Do not apply too many credit cards or loans in short duration – It will do more harm than good to your credit score as it is considered as credit hungry behavior. If you have a low credit score, neither avail nor enquire for any new credit cards unless you require one as it can impact your credit score negatively. Avoid any purchases like a home, car or bike in the same year. Also, plan for any such purchases over a broader time span. Do not get a new loan to repay the earlier. Consult the experts – You should contact the right source which specializes in student loans. GyanDhan is one such platform specially designed to take care of the high demand for education financing. With several years of experience and expertise in the domain, GyanDhan can help you to get an education loan even if your CIBIL score is on the lower side. You can check your loan eligibility and request a callback for further inquiry. Avail loans from NBFC – NBFCs (Non-banking Financial Companies) are more lenient towards credit scores and have offered loans to individuals having as low CIBIL score as 650. One downside of it is they charge comparatively higher interest rates. Collateral Loans – In case of a low score, valid collateral in the form of a property can help you to get your loan approved. Loan protector policies are also accepted as collateral in some banks. Loan from P2P Websites – P2P (peer-to-peer) lending websites also offer collateral-free loan for up to Rs. 5 Lakh. Such loans have tenure up to 36 months and charge 12-24% interest. In the case of having a low credit score, it can also be an option for you. Read Also - Detail Guide An excellent CIBIL score is imperative for getting an education loan and opening the door to your higher education in an esteemed institute. If you check your credit score and take corrective actions as mentioned above, you can improve your CIBIL score right in time and avail your education loan easily and with low interest as well. Also, there are education financing websites like GyanDhan which are specifically meant to help students avail the education loans irrespective of their CIBIL score and can help you pursue your study abroad.


This is a companion discussion topic for the original entry at https://www.gyandhan.com/blogs/get-an-education-loan-with-low-cibil-score

How can I check my CIBIL score?

You can check your CIBIL score on CIBIL (dot) com for a minimal cost of Rs. 550.

What if I don’t have a CIBIL score as I am a student and have never taken a loan?

If you don’t have a credit history, you will receive a score of “NA” or “NH”, which stands for Not Applicable and No Hit respectively. This is not a bad sign and is not viewed by the lender negatively. It only means that you don’t have any credit track record.