How to Get a Student Loan With a Low CIBIL Score?
Everyone wants a good education, and sometimes a person has to borrow money to get a good education because they would not be able to afford the education themselves. The process of taking an education loan in India is a tough one. Most banks have rational interest rates on education loans. A poor credit score will make it hard to get loans.
Education Loan CIBIL Score
A three-digit number with any value between 300 and 900 is the CIBIL Credit Score or CIBIL Score. This value is determined based on the details found in your CIR and is your creditworthiness measure. During the study abroad loan appraisal process, the lenders use this ranking. A higher score shows that you are most likely to repay the loan on time. Thus, your chances of getting the loan are increased. On the other hand, a lower score means that you are less likely to repay the loan on time and have greater chances of defaulting on the credit, and are a more risky borrower. This, therefore, reduces your chances of taking advantage of the loan.
The CIBIL algorithm calculates the CIBIL credit score based on 258 separate variables, each having equal weight, based on the CIR report and six-month historical financial data.
How Does the CIBIL Score Impact Loans For Education?
Statistics suggest that, on average, 90% of loans are given to borrowers with a score above 750. Having a decent credit score has its advantages:
- The lower interest-average rate
- Quicker clearance and less paperwork
- Higher amount of loan
- Higher cap on cards
If you have a decent CIBIL (credit score) ranking, most banks provide you with feasible interest rates on educational loans. It will be troublesome for a person with a low CIBIL score to use loans from their bank for education.
Tips to Get a Loan With a Low CIBIL Score
Here are some important to help you secure a loan with a low CIBIL score.
1. Show timely repayment records on current bills
CIBIL score depends on repaying the current debts in a timely manner. Ensure having a record of timely payments on all the unpaid debts, such as credit cards, EMIs, and utility bills, before applying for a loan. This will help in building a higher credit score and improve the chances of approval.
2. Present proof of income to sustain the ability to repay loans
Other variables, such as current salary or income streams, are considered by most lenders, along with credit score. Someone with a poor credit rating will also provide evidence of an increase in salaries, annual bonuses, or other additional sources of income in bank statements. This proves that the person is adequately financially stable to repay the loan on time.
3. Request for a loan from the NBFC
It is best not to apply for a loan from a bank because each assessment of the loan application is accompanied by the review of the credit report that results in hard investigations when someone has a bad credit score. Since they tend to have more relaxed policies against clients with poor credit ratings, it’s easier to apply for a loan from an NBFC. A significant thing to remember here, however, is that the interest rate paid by NBFCs is higher.
4. Opt for a low sum for personal loans
The lender may consider an individual as a risky client if he borrows a huge amount of money with a low credit score. So to produce a better credit score, he should opt for a lower sum and repay it annually. This will gain the trust of the lender in his creditworthiness, and he can go back for a higher sum of the loan. Repayment of a smaller amount would also be easier on the wallet.
5. Get a guarantor or request a joint loan
Even if someone has a low education loan CIBIL score or is new to credit, with a co-applicant or a guarantor, he will get approved for a loan quicker. The lender would be more likely to assist with a better offer on the loan sum if the guarantor has a decent credit history and a high credit score.
6. Request a Secured Loan
Another simple way to guarantee the loan repayment is to apply against any collateral, which may be against collateral such as gold or private property/other valuable properties.
When applying for a mortgage-backed loan, there are several banks and financial institutions that readily offer loans to low credit score holders. In general, properties such as land, gold, fixed deposits, etc., are approved by lenders as collateral to disburse a secured loan even to low CIBIL score applicants. Looking for an effortless way to secure the best education loan? UniCreds provides the most hassle-free way to avail secure collateral-free loans.
7. Resolving Credit Report Errors
There are also real instances where mistakes or misreporting on the credit report have occurred. Keep the education loan CIBIL score reviewed once every six months to ensure that such errors do not occur and that the credit report is revised.
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