November 27, 2024 · 19 mins read
Santosh Kumar
In today's fast-paced world, higher education is a powerful tool that can help students build strong and high-paying careers. Many dream of enrolling in prestigious higher education institutions in India and abroad to learn from the best minds in their field. Pursuing higher education is often very expensive, and not everyone can afford it. However, many great education loans are available for students who need financial help and support.
Education loans are great ways to cover most expenses involved in pursuing higher education. The loan can be paid off by the student once they complete the course and get a job. Some lenders also provide a grace period of about 6 to 12 months after the course is completed, giving the students enough time to find a job and begin earning.
Whenever you apply for an education loan, lenders consider many factors before they approve your application. One of these factors is the CIBIL score. The CIBIL score is considered while applying for an education loan and any other kind of loan.
The CIBIL score of an individual is a number that can be anywhere between 300 and 900. It is an indicator of that person's creditworthiness and is used by lenders to decide if the person is financially responsible or not and if he can be trusted with a loan. The CIBIL score is also known as the credit score because the credit history of a particular person basically determines it. Factors such as how timely they repay their loans, credit card bills, EMIs, etc., their credit utilisation ratio, how much secured and unsecured credit they have, how long their credit history is, etc., determine the CIBIL score of a person. A higher CIBIL score means higher chances of loan applications getting approved. A low CIBIL score is seen negatively and reduces the chances of loan approval.
Read More:: Benefits of Good Cibil Score
Since the CIBIL score of a person shows how well he has handled available credit in the past, all lenders have a minimum CIBIL score requirement for providing any loan to a borrower, even an education loan. No specific number between 300 and 900 is decided as a good CIBIL score or as a requirement for a loan by all banks and financial institutions alike. However, most lenders usually consider a score above 700 good enough to sanction an education loan. Let us dive a little bit deeper into what different ranges of CIBIL scores signify when you are trying to get an education loan:
1. Below 550: A credit score below 550 is categorised as the poorest possible credit score, and such an applicant will find it nearly impossible to get an education loan sanctioned. Such a low CIBIL score signifies to lenders that the applicant is not creditworthy and that there is a high risk of default payment if he is provided with a loan.
2. 550-650: Applicants with a CIBIL score falling within the range of 550 to 650 are seen as having an average CIBIL score - not too bad, but not too good. While getting an education loan approved is challenging for people with this score, it is not altogether impossible. Such people can opt for secured loans. Secured loans are given by keeping some assets of the borrower as collateral with the lender. This reduces the risk factor for them and safeguards their money. Therefore, they are more willing to provide a loan.
3. 650-750: Credit scores ranging between 650 and 700 are seen as good credit scores, and such applicants will find it easier to get an education loan to pursue further studies. This score range signifies that the person has been responsible for repaying their past loans, and prospective lenders can trust him with their money. If you want an education loan and the process to be easy and smooth, you must aim for a score above 650.
4. 750-900: A credit score above 750 is an excellent score, and it is easiest for people with such a score to obtain an education loan. Such applicants are the most trustworthy borrowers, and lenders readily give them huge amounts of loans.
Read More:: Reasons For Loan Rejection Despite Good CIBIL Score
Here is some additional information that you must know:
Even if your education loan gets approved despite having an average CIBIL score, you will have to face some unfavourable and disadvantageous terms and conditions. For instance, you might get a lower-than-desired sanction lower than the desired amount, face higher-than-usual interest rates, and get less time, i.e., a shorter tenure, to pay back the loan amount. On the other hand, with an excellent CIBIL score you can get added advantages and benefits on top of getting your education loan approved. You can negotiate for a higher amount of loan that can cover more of your academic expenses, get a much longer tenure that would lead to smaller EMIs, make the repaying process easier, and even get lower than usual interest rates, saving you a lot of money.
Therefore, it is always advised to maintain the highest possible CIBIL score so that you can get an education loan on the best possible terms.
As we have already informed you, CIBIL scores are determined based on a person's credit history. However, many students do not have a credit history at all since they have not begun earning yet. Do not worry; even students without a credit history and a credit score can get an education loan. This is possible if they get a parent or a guardian with a well-established credit history as a joint applicant on the loan.
The joint applicant basically acts like a guarantor. This means that if you cannot repay the loan for any reason, the joint applicant will be responsible for repaying the amount on your behalf. Even students with low credit scores who find themselves ineligible to get an education loan can apply jointly with a joint applicant who has a good and high credit score to get the application approved and the loan sanctioned.
Read More:: What is CMR Rating in CIBIL?
In case you wish to get an education loan that can fund and support your academic endeavours but you have a very low CIBIL score, here is some advice for you that will help you improve your credit score over time and get you a good education loan to pursue higher studies:
1. Repay Any Pending Debts: If you have any ongoing loans with pending payments, make sure you pay them in full as soon as possible. Unpaid loans pull your credit score down. Stay on track with all your payments. Once you make this a habit, your CIBIL score will go up eventually.
2. Avoid Too Many Applications: In case a lender has rejected your application for an education loan, do not make another loan application immediately. There are two reasons behind this. First, a rejected loan application impacts your CIBIL score poorly. Secondly, making too many enquiries also causes the credit score to go low. These are known as hard enquiries, and it is preferred to have as few hard enquiries as possible. Therefore, it is advised that you wait for some time before you apply for another loan.
When you apply again, improve upon any shortcomings that led to rejection the first time around so that you do not have to face another rejection that would harm your CIBIL score.
3. Lower Your Utilisation of Available Credit: It is not a good habit to use all of your total available credit, as it lowers your credit utilisation ratio. When you have a high amount of credit available but keep your utilisation low, it impacts your credit score wonderfully and is a good way of increasing it.
Read More:: Is 776 a Good CIBIL Score?
It is of extreme importance that you have a credit history and a credit score since they are requirements whenever you want to get loans, credit cards, insurance, etc. If you are a student with no credit history yet, getting an education loan is a wonderful way to start building your credit history.
Once you complete your education, you are then required to get employed at the earliest and begin repaying the loan. These repayments will act like the building blocks of your credit history. So make sure that you pay the monthly installments regularly and on time so that you can build up a high credit score.
Read More:: Is 772 a Good CIBIL Score?
A CIBIL score is a three-digit number that represents your creditworthiness. Ranging from 300 to 900, the score is decided by or based on your financial history. It’s somewhat like your financial report card on which lenders base their decision if they can or cannot trust their money with you. Basically, a good score, which starts at 700 and above, assures a lender of your responsible behavior as a financier, while anything below that serves as a warning for them.
CIBIL score for an education loan varies from one lender to another. Therefore, their approval also varies according to the loan provider, which you must check during applying. Unlike government-backed schemes, private lenders don’t approve a loan unless the CIBIL score is 700 and above. Hence, one must try to maintain the score.
That said, in several cases the co-applicant’s education CIBIL score is also taken into consideration. If the CIBIL score of the co-applicant is strong, it increases the chances of approval and best interest rates deals.
Here are the criteria that you must adhere to become eligible for an education loan in India:
1: Nationality: You must be an Indian citizen to apply for an education loan.
2: Admission: You must secure your admission to a recognized institution in India institution, or abroad.
3: Course: Your loan must be for a course that’s professional, technical, or academic.
4: Co-applicant: You will require a good co-applicant, especially if you don’t have a good credit history.
5: CIBIL Score: You must maintain a good education loan CIBIL Score to boost loan approval chances with your lenders.
If you maintain all the above criteria, your chances of getting an education loan will increase, raising your chances of receiving a good education loan.
Students and parents often have a common question,”Is CIBIL score required for an education?” The answer is— it depends on the type of lender and whether it's the student or the co-applicant is the primary borrower.
Most banks and NBFCs prefer a CIBIL score of 700 and up during the time of evaluation of education loan applications, especially if it's unsecured. However, as several students don’t have a CIBIL score, they evaluate the score of their co-applicant, who’s usually their parent or guardian. Here’s a complete breakdown on how much cibil score is good for quick loan approval:
700 and above: A score above 700 is considered ideal. It has a higher chance of approval, with lower interest rates.
650–699: A score between 650 to 699 is acceptable for some lenders. However, the interest rates will be higher, or one would need to present collateral.
Below 650: A CIBIL score below 650 is considered risky, and you might need a guarantor or collateral to get the loan approved. However, even then, the loan amount wouldn’t be guaranteed.
Yes, in most cases, a CIBIL score is required for education loan approval, especially from private banks and NBFCs. Even if the student doesn’t have a credit history, the co-applicant’s score becomes a deciding factor. Government banks may offer more flexibility under education loan schemes, but a good credit profile always improves your chances.
Maintaining a solid repayment history, paying EMIs on time, and reducing credit card debt can all help in building or improving a good CIBIL score before applying.
Wondering if you can apply with a minimum CIBIL score for an education loan? You are not the only one. Several students face similar challenges due to limited credit history. However, let us assure you that a low CIBIL score doesn’t disqualify you from securing a loan. How? Find Out!!
You must know that lenders usually assess the CIBIL score for loan eligibility to measure risk. Therefore, while learning about abroad education loans, you must know that a high CIBIL score is important. However, it doesn’t mean that you cannot secure a loan with a low CIBIL score.
Here are your options:
1: Apply with a Co-applicant: Your co-borrower must have a good CIBIL score, and it will strengthen your application.
2: Offer Collateral: If you offer collateral like a property, FD or other assets, your education loan will become a secured one, making you eligible.
3: Choose Government Banks: You can opt for a government bank’s loan scheme with flexible CIBIL score requirements.
4: Approach NBFCs or Fintech Lenders: Some Fintech and NBFCs might consider you, given that you will have a good chance of high income in the future.
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 -
300-699: Poor CIBIL score, which reduces approval prospects. Additional financial paperwork will be required.
700-749: Eligible. However, you might not get a loan to suit all your terms and requirements.
750 & Above: Easy to acquire an educational loan. Lenders determine financial reliability from such a score.
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.
Any form of credit that you obtain can have both positive and negative effects on your CIBIL score, depending on how you manage the loan repayments.
Aspect: Timely repayments Positive impact: Paying your Education Loan EMIs on time shows responsible financial behaviour and improves your CIBIL score. Avoiding negative impact: Late or missed EMIs can harm your credit score and may make it difficult to qualify for future credit with better terms.
Aspect: Increased credit mix Positive impact: Diversifying your portfolio with an Education Loan can positively impact your credit score. Avoiding negative impact: Multiple loan applications result in hard inquiries, each of which can slightly lower your score.
Aspect: Enhanced financial discipline Positive impact: Long-term loans offer a chance to build a credit history by demonstrating responsible borrowing and timely repayments. Avoiding negative impact: High loan balances can negatively affect your credit score, especially if they contribute to a high credit utilisation ratio.
Aspect: Improved creditworthiness Positive impact: A good repayment history can lead to better loan offers and higher credit limits in the future. Avoiding negative impact: Co-signing an Education Loan for someone who defaults can negatively impact your own credit score.
Your CIBIL score for Education Loan approval matters. It influences eligibility, interest rates, loan amounts, the need for a cosigner, approval time, and the overall loan terms. Thus, practising responsible financial habits and prudent credit management is important to increase your chances of loan approval and secure favourable terms.
A lot of people today apply for education loans that can fund their academic journey and take care of all major expenses so that they can pursue their dream courses and establish great careers. However, not everyone gets an education loan. Banks consider many things before they approve loan applications; one of these things is the CIBIL score of the applicant. A CIBIL score is required for education loans because it tells the lenders if the borrower is trustworthy and if he will repay the loan on time or not. A CIBIL score that is above 700 is usually a pre-requisite in order to get an education loan. If you have a lower CIBIL score that makes it hard for you to get an education loan, you can try some things to improve your score. For instance, pay off any pending debts, stop making too many loan applications, and lower your credit utilisation ratio. These things will help you take your credit score up over time. If you do not have time and require an education loan urgently, apply with a joint applicant, such as a parent or a guardian, who has a good CIBIL score and can act as a guarantor. This is also a good idea in case you do not have a credit history yet.
1. What is a good CIBIL score for education loans?
While each financial institution has a different credit score requirement, most lenders consider a score above 700 to be good enough to approve an education loan. A score below this will make it challenging to get a loan approved.
2. Can I get an education loan if I do not have a credit score?
Yes, you can get an education loan even if you do not have a credit score yet. Banks realise that many students have not begun earning yet and they provide loans to them if they get a parent or a guardian to apply as a joint applicant with them. Parents and guardians usually have long credit histories, and their good credit scores will enable them to get an education loan. This way, banks feel assured of getting their money back even if you fail to repay the loan.
3. If my education loan is rejected, will it affect my CIBIL score?
Yes, if your application for an education loan is rejected it will impact your CIBIL score poorly.
4. How to build a credit score with an education loan?
When you start repaying the education loan after completing your course, you also start building a credit history and, thus, a credit score.
5. Can everyone get an education loan?
No. Not everyone who applies for an education loan gets one. Your application must be approved if you have a good CIBIL score and meet other eligibility criteria.
Yes, you can get education loan with low CIBIL svore and with no credit history.
Yes, Government banks and private banks have different CIBIL score requirements like public sector bank requires little low CIBIL score for secured loans and private sectors or NBFC’s requires higher CIBIL score for unsecured loans.
A co-applicant’s score will not affect your credit rating in any way. But if the main borrower defaults, it negatively impacts the credit profile of both applicants. Therefore, it is advisable to check the CIBIL scores of the co-applicant/s to ensure clarity on their credit profile and repayment history.
Yes, government schemes like the Central Scheme for Interest Subsidy (CSIS) and Pradhan Mantri Vidya Lakshmi Karyakram offer loans to students from economically weaker sections without strict CIBIL score checks.
Yes, in most cases, a CIBIL score is required for education loan approval even if it is secured loan or unsecured loan, especially from private banks and NBFCs.
A student loan works just like any other loan. So yes, it does affect your credit score. If you’re late on repayments or default on it, it will negatively affect your credit score. Unlike other loans, however, repaying your student loan works a little differently which is why understanding how it works becomes so important.
Besides the CIBIL score, the bank considers various check list for education loan applications, including the applicant's academic record, the course and institution chosen, the co-applicant's or guarantor's financial standing, they also assess the applicant's and co-applicant's income, employment history, and debt-to-income ratio.
Yes, you can check your cibil score for free through various platforms.
If your co-applicant has low cibil score it will negatively impact your loan, you can consuder secured loans or any other options.
You can apply withy a co- applicant with a good CIBIL score or you can try to improve your CIBIL score by repaying debts on time and more
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