India is witnessing an education inflation that supersedes the rise in costs on most other fronts. For instance, an MBA degree is predicted to cost up to Rs.60 lakh by 2025 and an engineering degree up to Rs.30 lakh by the same time. Given this reality, your savings and investments may not sufficiently cover your child’s higher education aspirations. In such instances, you can opt for a personal loan for education to pay the tuition fees in addition to accommodation, travel or any other aspect of your child’s higher education. Since this education loan is unsecured in nature, your credit score (or CIBIL score) becomes a crucial part of its eligibility criteria.
Since your CIBIL score considers your past experience with credit and signals the credit risk you pose as a borrower, lenders check CIBIL score before approving your loan application. While a good credit score allows you to benefit from attractive personal loan interest rates and other favourable terms, a bad CIBIL score may lead to outright rejection of your application. However, there are still ways in which you can avail an education loan with a bad score. Read on to know what constitutes a bad CIBIL score and how you can avail a personal loan for education despite it.
What is a bad CIBIL score?
While a score of 750+ is considered a good score, a bad CIBIL score for a personal loan for education is anything under 650. A bad CIBIL score can result from gross mismanagement of debt like defaulting on your loan or delayed monthly repayments. Additionally, the following reasons can result in a poor CIBIL score.
- Taking too many unsecured personal loans and not having experience with other types of credit
- Maxing out the limit of your credit cards, which increases your credit utilisation ratio
- Regularly choosing minimum payment option for your credit card debt
- Numerous rejected loan applications
- Getting loan write-offs and settling credit card debts after failing to pay the loan amount
- Having a high debt to income ratio with a large number of unpaid debt
Furthermore, if you have not taken any credit so far, your CIBIL score is zero. Thus, when you apply for a loan, the probability of your application being rejected is higher.
How to get an education loan with a bad credit score?
If you need to apply for a personal loan for education quickly and don’t have time to try and improve your CIBIL score, you can try the following methods to get access to financing.
- Rather than banks, apply for a personal loan for education from other lenders like NBFCs. Though these may come with higher education loan interest rates, they may approve your loan application as they have simpler eligibility criteria.
- Apply for an education loan with a co-applicant who has a high CIBIL score. This will help you qualify for the loan with ease as the repayment responsibility is now shared.
- Consider taking a secured education loan by attaching a property or other security as collateral. This way, your low CIBIL score will not be the most important criteria for approval.
- Another tip is to not apply for an education loan with multiple lenders when you have a bad credit score. A lender makes a hard inquiry to check your credit score every time you apply for a loan. Multiple hard enquiries in a short time further decrease your CIBIL score.
How to improve your CIBIL score?
If you have time in hand, you can improve your CIBIL score to increase your chances of getting approved for a personal loan for education.
- Make sure to check CIBIL score to assess where you stand and download your credit report to see where you can improve.
- Report any errors in your CIBIL report such as open loan accounts that you have paid off in full.
- Consolidate all your debt, if possible, to boost your CIBIL score.
- Repay your EMIs in a timely manner, within the stipulated tenor.
- Avoid making new loan applications until you pay off your existing loans.
- Pay off your credit card bills in time and don’t utilise your credit limit to its fullest.
- If you haven’t taken any loans, opt for a small secured loan and repay it on time to increase your score.
With these pointers, you can avail an education loan with a bad CIBIL score or improve your score and then apply for a loan. Consider opting for the collateral-free Bajaj Finserv Personal Loan for Education as it comes with simple eligibility criteria and competitive interest rates. You can use the high loan amount of up to Rs.25 lakh to finance your child’s higher education and related expenses in India or overseas. It comes with a long repayment tenure up to 60 months and offers the Flexi Loan facility for further convenience. This allows you to borrow as and when required from the total loan amount without submitting a fresh application every time and even helps you reduce your EMIs up to 45%.
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