If you had to loan someone money, wouldn’t it be helpful to know if they are good for it? CIBIL score is that tool banks use to shock-proof themselves from bad debts.
Both government and private terms and conditions for lending education loans generally emphasize the need for retaining a good CIBIL score. And one of the most common grounds for refusal of international education loans by banks and NBFCs is a poor CIBIL score.
Many applicants do not comprehend how important it is to keep a good CIBIL score as they do not know what it signifies. The CIBIL score is a key component considered during the screening of applications for student loans. It is a way for banks to verify your loan repayment capacity.
So can you really get an education loan with a low CIBIL score? Let’s find out but first, let’s begin by knowing what CIBIL means, shall we?
IN THIS BLOG:
What is CIBIL Score?
Credit Information Bureau India Limited or CIBIL is a credit information company licensed by the Reserve Bank of India (RBI) that collects and maintains records of an individual’s credit histories.
Your credit information is submitted to CIBIL by banks and other lenders on a monthly basis. These records include information on EMI and card payments and any other information pertaining to your credit profile such as any late or missing payments, any changes to your overall credit limit. This information is used to develop a CIBIL score which enables lenders to evaluate and approve loan applications.
CIBIL provides a three-digit number that is between 300-900 based on the summary of all your credit history. A high CIBIL score shows that you are a less risky borrower which in turn enhances your chances of getting a loan. On the other hand, a low CIBIL score lowers your likelihood of getting a loan.
What is the CIBIL score required for an education loan?
The CIBIL score of an applicant and the co-applicant are one of the most crucial variables in getting an education loan. Your score can be between 1 and 999. The recommended CIBIL score for education is, however, 750 or above.
Statistics indicate that 90% of the loans for applicants with a score of over 750 are authorized. Thus applicants with lower CIBIL scores such as 550 or 590 undergo a more challenging loan approval process.
How to obtain a loan with a low CIBIL score?
A loan with a low CIBIL score is difficult to obtain, but it is not impossible. If you have a low CIBIL score it would be helpful to consider the following suggestions to secure your education loan:
- Timely repayment of Current Bills – Try and ensure timely payments of your current bills as a CIBIL score depends on the repayment of current debts. Current bills include payment of credit cards, EMIs, utility bills, etc. This will help you improve your credit score, which will help further the loan authorization. So, make sure that you have paid your current debts before applying for a student loan.
- Proof of income – Even with a bad CIBIL score, current salaries or income streams such as a raise, annual bonuses, etc provides evidence of income that shows that the borrower is financially stable enough to repay the loan.
- Request a Secured Education Loan – A secured loan offers the lender security that the loan will be repaid. When you request a secured loan, you apply against any collateral such as land, gold, fixed deposits, etc which significantly improves the chances of getting your loan approved even with a low CIBIL score.
- Apply for a low sum of personal loan – Borrowing a huge amount of money with a low CIBIL score is not a good idea. Instead, you can apply for a lesser amount with an annual repayment plan to make a stronger case.
- Request a Joint loan – Students often have low CIBIL scores or are generally new to credit. If that is your case, you can request a joint loan with a co-applicant or guarantor (preferably with a good credit history) to improve your chances of getting an education loan.
- Fix CRR – The easiest way to ensure that your wrong credit score doesn’t affect your chances of receiving a loan is to fix the inaccuracies. There may also be an issue or error in the report. Every six month, check your credit record to guarantee that it does not happen again.
Lastly, if your score is less than 700, avoid approaching large banks. Each loan inquiry has an impact on your CIBIL score and the possibility of receiving a loan from a large bank with a credit score less than 700, is dreadful. However, don’t panic, you can still apply to certain NBFCs that have a lending value of 600 that can provide you with a loan.
If you need more advice on getting a loan with low CIBIL score or looking for sustainable financing options with low interest rates and easy payback options, connect with our counsellors for a free 15-minute session.