Linking Education Loan to CIBIL Score Condemned

Every parent plans to give their child the best education for a complete and successful life. Keeping this in mind, parents, who want to provide their children with quality education, keep aside some funds or make investments for the long term. However, the cost of education is already relatively high, that even investments might fall short, it is only natural that parents and students are turning to education loans. The complex borrowing decisions that come with education loans make it essential for students to have all the information about education loans.

What is an Education Loan?

This loan plays a vital role in financing education for students who require money by helping in bridging the gap in finances. It is a loan offered to students who want to study in India or pursue higher studies abroad. The maximum loan amount provided for financing studies in India and abroad is different and varies from one lender to another. This loan covers all the essential course fees and expenses such as college accommodation, exam and other such charges. Interest rates on education loans usually range between 12 to 16%. The introductory rate of interest starts from 9.15% onwards. Floating or fixed interest rates can be chosen for education loans.

Eligibility Criteria

Students applying for education loans need to understand the eligibility guidelines and qualify for the same, to be able to apply for an Education Loan. The eligibility criteria for the loan varies for different banks. However, some common factors that are taken into consideration by all banks and lending institutions include:

  • The applicant must be a citizen of India.
  • The loan applicant must be the age of 18 else his/her parents will have to avail the loan.
  • Candidates with an excellent academic background are eligible.
  • Must have secured admission to a recognized university/institution/college.
  • The applicant’s desired course must be a technical or professional one, as more preference is provided to job oriented courses.

Documents Required 

For Student Applicants:

  • Proof of Identity: Aadhar Card/ Voter ID card/ PAN Card/ Driver’s License, etc.
  • Proof of Residence: Electricity Bill/Phone Bill/ Passport/ Aadhar card
  • Academic Records of 10th and 12th Result
  • Graduation Result
  • An offer Letter or Admission Letter from the Institution. A conditional admission letter is required in case of studying overseas.
  • Statement mentioning the cost of study/ Schedule of expenses
  • 2 passport-size photographs
  • For any previous loan taken from Banks/Lenders, then a loan account statement for the previous 1 year is required 

For Co-Applicants:

  • Proof of Identity: PAN Card/ Passport/ Aadhar Card/Driving License
  • Proof of Address: Telephone Bill/ Electricity Bill/Passport/ Driving License/ Aadhaar Card
  • 2 Passport-size Photographs
  • For any previous loan availed from Banks and lending institutions, then a Loan account statement for last 1 year is required

CIBIL Score for Education Loan

When a student applies for a loan for education, usually the parent or a guardian is the ‘guarantor’ for the loan. This is also the case if the student does not have a credit history and the lender requires a guarantor for the loan. The co-applicant or guarantor must have a good credit score to ensure that the loan application gets approved. Hence, it is necessary to check cibil score of the guarantor before applying for a loan. Many lenders offer online services where you can check cibil score by pan card and apply for loans online with ease.

A credit score of 750 and above is considered a good score and can also help you get better rates on loan from the lender. It is crucial for both guarantor/co-applicant, as well as loan applicants, to maintain an excellent score to undergo their education loan process without any issues. In cases where the guarantors or the student’s parents’ cibil score is low, it might be difficult to get an education loan. Some banks are reluctant to grant education loans for children of individuals with low CIBIL scores. This is a significant problem as the child’s education is at stake due to financial shortage. George Kurian, Vice-Chairman of National Commission for Minorities, expressed displeasure over the denial of education loan by few banks to deserving students citing low CIBIL scores of their parents. Also, he assured that he would draw the attention of the Central government towards the issue so that no child suffers from the financial problems of their parents.

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