Can you Get a Study Abroad Education Loan with Low Cibil Score?

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Having a low credit score can make it challenging to obtain a loan, including an education loan. CIBIL (Credit Information Bureau India Limited) is one of the credit bureaus in India that provides credit scores based on an individual’s credit history. Lenders often consider credit scores as an important factor when assessing a borrower’s creditworthiness. However, many options are available for a study abroad education loan with low CIBIL score like loans from NBFCs and Private lenders. Additionally, some banks also make an exception and provide education loans on the basis of earning potential of beneficiaries. 

Importance of CIBIL Score in Education Loan

The CIBIL score, or credit score, is a crucial factor for lenders when assessing the creditworthiness of loan applicants, including education loans. Here are some reasons why the CIBIL score is important for education loans:

Loan Approval

Lenders use the credit score as an indicator of an individual’s creditworthiness. A higher credit score demonstrates responsible financial behaviour and lower credit risk. A good credit score improves the chances of loan approval for education financing.

Interest Rates

The CIBIL score influences the interest rate offered by lenders. A higher credit score may result in a lower interest rate, which can significantly affect the cost of the education loan over its repayment term. A low credit score could lead to higher interest rates, potentially increasing the overall cost of borrowing.

Also Read: Interest Rate Parity: Definition, Calculator, Importance in Education Loan

Loan Amount

Lenders also consider the credit score when determining the loan amount they are willing to provide. A good credit score can increase your eligibility for a higher loan amount, which is particularly important for covering the expenses of higher education. However, one can easily avail of study abroad loan with low CIBIL score. 

Repayment Terms

A strong credit score can influence the terms and conditions of the loan, including the repayment period and flexibility in repayment options. Lenders are more likely to offer favourable terms to individuals with a higher credit score.

Co-signer Requirements

In cases where a borrower has a low credit score, lenders may require a co-signer or guarantor with a good credit history. The co-signers creditworthiness can help mitigate the risk for the lender and increase the chances of loan approval.

Also Read: Education Loan Insurance: Benefits, Calculator, Programs, Cost, Importance

How to Get a Study Abroad Loan With a Low CIBIL Score?

Getting an education loan with a low CIBIL score can be challenging, but it’s not impossible. Here are some steps you can take to improve your chances:

Research Lenders

Look for lenders, including nationalised banks and NBFCs, that are more flexible in their credit score requirements for education loans. Some institutions may have specific loan products designed for individuals seeking loan with low CIBIL score.

Provide Collateral or Guarantor

Offering collateral or a guarantor with a good credit history can increase your chances of getting approved for an education loan. Collateral security can be in the form of property, fixed deposits, or other valuable assets.

Demonstrate Repayment Ability

Prepare a strong case to demonstrate your ability to repay the loan. This can include showcasing a stable income source, employment history, and any other assets or investments you possess that can assure the lender of your repayment capacity.

Explain Credit History

If your low credit score is due to extenuating circumstances such as medical emergencies or temporary financial setbacks explain these circumstances to the lender. Providing a detailed explanation of why your credit score is low can help them understand your situation better and assist you in availing of an education loan with low CIBIL score. 

Also Read: RBI Guidelines for Education Loan

Seek a Co-signer

Find a co-signer with a good credit score who is willing to guarantee your education loan. A co-signer is equally responsible for loan repayment, and their good credit history can strengthen your loan application.

Build Creditworthiness

Take steps to improve your credit score by paying bills and debts on time, reducing outstanding debts, and maintaining a low credit utilization ratio. This process takes time, but it can gradually improve your creditworthiness.

Approach Non-Traditional Lenders

Explore alternative lending options like peer-to-peer lending platforms or community-based lending programs that may consider factors beyond just your credit score.

Remember to gather all necessary documents, such as proof of admission to an educational institution, cost of education, and your academic transcripts, as lenders will require these during the application process. Additionally, it is crucial to consult with multiple lenders, discuss your situation, and understand their specific requirements and terms before finalizing any loan agreement.

Also Read: Here’s How You Can Get an Education Loan Without Income Proof!

Other Options for Attaining Study Abroad Loan With Low CIBIL Score

While it may be difficult to secure an education loan with low CIBIL score, there are a few potential options you can explore:

Providing Collateral or Guarantor

Providing collateral or a guarantor with a strong credit history may increase your chances of getting an education loan to study abroad, even with a low credit score. Collateral can be in the form of property, fixed deposits, or other valuable assets.

Exploring Non-Banking Financial Companies (NBFCs)

Some NBFCs may offer education loans to individuals with lower credit scores compared to traditional banks. However, they may charge higher interest rates or require additional documentation.

Considering Creditworthy Co-applicant

You can consider applying for an education loan with a creditworthy co-applicant, such as a family member or a close relative. Their stronger credit profile may improve the chances of approval.

Improving your Credit Score

It is advisable to work on improving your credit score before applying for a loan with low CIBIL score. This can be done by ensuring timely payment of bills, reducing outstanding debts, and maintaining a good credit utilization ratio.

Also Read: What are the Reasons for Education Loan Rejection? 

FAQs

1. Can I get an education loan with a low CIBIL score?

Yes. A student who is able to produce a co-signer or displays the potential to have an income in the future are eligible for student loan with a low CIBIL score. 

2. How can I improve my chances of getting an education loan with low CIBIL score?

The initial step in improving the chances of procuring a student loan with a low credit score is to pay off any outstanding bills and loans. One must show the great potential of earning a decent income in the future. Furthermore, one must have a co-applicant who can vouch for the timely repayment of the loan. 

3. Which financial organisations offer education loans to students with low CIBIL scores?

Private lenders, NBFCs, and some banks provide loans to individuals with low credit scores. The terms and conditions of loan provision of each entity vary significantly. 

To learn more about study abroad loans and international money transfers, stay in tune with Fly Finance. To get proper guidance and required assistance, connect us at 1800 572 000. 

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