How to Get an Abroad Education Loan with Low CIBIL Score?

When a student is preparing for abroad education they prepare for scores, letters of recommendation, and statements of purpose, they often lack guidance when it comes to the financial aspects. However, when things move forward and they apply for the education loan they usually forget one thing their CIBIL score. The CIBIL score required for education loan and is the primary factor that the lender verifies. Financial institutions often look for a credit score of 750 or above, as reported by CIBIL. If you have never withdrawn an education loan your CIBIL will be 0 or -1. Still, to understand the CIBIL score to the core you can use the below information. 

What is CIBIL Credit Score?

When a person withdraws a loan or gets a credit card you create a financial history. However, the CIBIL score is built based on your repayment information whenever you borrow money. The CIBIL Credit score is a summary of your entire credit history in the form of a three-digit number. It normally ranges from 300 to 900 and is a representation of your creditworthiness. A higher score indicates that you are a less risky borrower, increasing your chances of availing a loan whereas a lower score decreases that probability.

What is the Credit Information Report? 

During the education loan, CIBIL score isn’t the primary factor that is verified. Instead, lenders check your Credit Information Report (CIR). The repayment history shows how good you are with your finances.

A credit report typically includes information such as personal identification details, credit accounts (credit cards, loans, mortgages), payment history, credit utilization, credit inquiries, and public records (such as bankruptcies or tax liens). This history is even used to check and confirm the obligations you have on your income. So, if you still think that, Is CIBIL score required for education loan? Of course! Yes.

Four Information Included in Your Credit Report:

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  Personal information: Name, address, PAN no, date of birth, and employment information.

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  Credit history: Types of accounts, date of account opening, credit limit, account balance, payment history.

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  Public records: Garnishments, foreclosures, legal suits, and judgments.

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  Inquiries: List of lenders that have checked the individual's credit report in the past.

How is the CIBIL Score Calculated?

Your Credit Information Report (CIR) and six months of financial data are used to calculate the CIBIL score. The CIBIL algorithm calculates the CIBIL credit score based on 258 different variables each having an appropriate weight. But, the five primary factors that can be controlled by you are mentioned below:

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  Applicant’s repayment history - The credit score is mostly a reflection of how promptly you have repaid your debt. Any default in the credit card payment or loan repayment will negatively affect the CIBIL score.

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  Credit utilization limit - Using credit more than the credit limit also negatively affects the CIBIL score. It reflects poor spending habits.

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  Duration of using the credit - In simple terms, it means the total number of years the credit account has been open. A long and positive credit history will help the lender make a quicker decision on the credit application.

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  Paying the minimum amount due - Chances of falling into a debt trap increase exponentially if you only pay the minimum amount due every month. Interest will keep compounding on the remaining balance. Further, it reflects poorly on repayment behavior.

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  Credit mix - it is important to have a healthy mix of secured and unsecured credit. It is looked at by the lenders positively as it shows that you have experience in handling both types of credit. Furthermore, having only one type of credit can affect your credit score negatively.

CIBIL Score Ranges

CIBIL scores can vary from 300 to 900, with 900 indicating the highest level of creditworthiness. Having a CIBIL score of 750 or above on your credit report is ideal, as it enhances your eligibility for loans and credit cards.

Pros and Cons of Education Loans with Low CIBIL Score

There are both pros and cons of the education loan CIBILl score which you might not know. We have listed them below:

Does CIBIL Score Affect Education Loans?

When you are applying for a loan not just an education loan, the CIBIL score impacts your approval and interest rate. Statistics show that on average, 90% of the loans are granted to applicants with a score above 750. The higher the score, the higher the probability of getting your loan approved, and a study loan is no exception to this rule. Having a good credit score has its perks including:

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  Lower rate of interest
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  Quicker approval with less documentation
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  Higher loan amount
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  Higher card limit
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  Longer tenure

Thus, when it comes to education loans, the CIBIL score is a crucial factor in the loan approval process. The minimum CIBIL score for an education loan is 650.

The majority of the students might not have taken a loan or credit card in the past and thus don’t have any credit history. In such cases, when they apply for an education loan, the lender checks the credit history of the co-applicant who usually are, their parents. Thus, if the parents have a low CIBIL score, there is a high chance that the loan can be denied.

Can We Get Education Loan Without CIBIL Score?

One of the most popular questions related to low CIBIL scores is - “Is CIBIL score required for education loan ?” All the reasons mentioned above answer this question. Yet, the most basic thing that people are confused about. Can a student withdraw an education loan without CIBIL score? So, the answer is that when the student or co-applicant doesn’t have a credit history.

The CIBIL score becomes 0 or -1 which is considered positive and the loan is approved quickly in this case. These scores are considered equivalent to the 750 CIBIL score therefore, you don’t need to run for a credit card to get an education loan.

Can Apply for an Education Loan with Low CIBIL Score?

If you are applying for an education loan with low CIBIL score then you can apply for a minimum CIBIL score for education loans is 650. However, even at CIBIL 650, it will be very difficult for you to get an education loan. CIBIL scores above 700 are generally considered for an education loan. For low CIBIL scores, lenders charge high interest rates which can cost you lakhs in the longer run.

Alternative Options for Low CIBIL Scores

If you are applying for an abroad education loan with low CIBIL score then you use the following ways to avoid rejection from the lender:

Proof of Income:

A good income will prove to the lender that the applicant can repay the loan. Even with a bad credit score, proof of income shows that the borrower is adequately financially stable to repay the loan.

No Objection Certificate:

Sometimes the CIBIL score is affected if you missed the credit card bill payment on time. Thus, impacting your credit score. You will become the education loan for CIBIL defaulters in a day. To avoid this you can get the No Objection Certificate (NOC) from the lender to get your approval letter. 

Change the Co-Applicant:

Many lenders consider spouses, siblings, and other blood relatives as co-applicants. So, if your current co-applicant has a low CIBIL score then you can change the co-applicant to make your loan application better. 

Secured Loan:

Secured loans are already safeguarded using the asset hence, using the secured loan option you can get an education loan. In a secured loan, the co-applicant financial profile is not the primary factor but, a secondary factor that might influence it. But, it won’t have too much impact. 

Resolve Credit Report Errors:

The best method to ensure your bad credit score doesn’t ruin your chances of getting a loan is to resolve the errors. A mistake or an error in the report can also occur. Review your credit report every six months to ensure this doesn’t happen again.

Apply to NBFCs:

Banks tend to scrutinize the loan application rigorously. Whereas, NBFCs might relax some policies if the student’s profile is outstanding.

Eligibility Criteria For Getting an Education Loan With a Low CIBIL Score

It is a little difficult to get an education loan for a low CIBIL score but fortunately not impossible. Here are some tips on how you can avail abroad education loan when you have low CIBIL score:

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  Strong Academics: Healthy and strong school records stand a great chance of increasing the probability of approval of your loans.

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  Institution’s Reputation: Loans for studies at well-known and esteemed institutions are regarded favourably, more than other institutions.

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  Course Category: Approve a loan for professional courses with high chances of getting a job like an MBA.

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  Borrower evaluation: Lenders will check your earnings and soundness in finances to gauge your ability to repay.

Challenges in Securing Education Loans with Bad Credit

Education loan with low CIBIL scores are not impossible to get however, they also come with lots of challenges. They are as follows:

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  High Risk for Lenders: Providing an education loan with low CIBIL score is a risk for the lender. This makes the lenders hesitate to approve the loan application and increases the processing time.

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  Limited Loan Options: Traditional lenders like SBI, UBI, PNB, IDFC, and many more banks don’t provide education loan with low CIBIL scores. Thus, you are required to explore alternative lenders for the education loan.

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  Higher Credit Scores: You will be charged with higher interest rates on loans. This higher interest rate can increase the overall cost of the loan and hamper your long-term financial capability. 

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  Stricter Eligibility Criteria: Lenders can impose strict eligibility criteria if you have a low CIBIL score. Therefore, makes the loan approval process more difficult. 

What Can You Do To Prepare?

All in all, the late realization of a poor CIBIL score will only stand to hamper the process of getting the loan approved in time. To avoid this, you need to check your CIBIL score right away. This can be done by visiting the official website of CIBIL, paying a nominal fee, and submitting the required documentation.

Note: that if your score is 0 or -1, this just means that you do not have a credit history, and getting a loan or a credit card will help you establish your credit history over time.

If you have a score >700, you are on the right track and should continue to maintain this. If you see a score lower than 700, check your credit report to see the cause of the low rating. If you believe that all your past payments were timely, and the report is erroneous, you can dispute the report with CIBIL for free. The quoted resolution time is 1 month, but can typically take ~2-3 months – so we urge you to start soon!

How to Improve Your CIBIL Score?

Mindful financial decisions can gradually boost your creditworthiness. If you have a low credit score, you can take the following measures to get on the right track.

An excellent CIBIL score is imperative for getting an education loan and opening the door to your higher education in an esteemed institute. If you check your credit score and take corrective actions as mentioned above, you can improve your CIBIL score right in time and avail of your education loan easily and with low interest as well. Also, there are education financing websites like GyanDhan which are specifically meant to help students avail of education loans irrespective of their CIBIL score. GyanDhan provides education loan assistance for students planning their education abroad. We have partnered with leading public, and private banks and NBFCs. To start your abroad education loan journey check your education loan eligibility.

Frequently Asked Questions