Education is often considered a stepping stone to a better life. Education loans are made available at fairly easy terms and competitive rates available due to government efforts to ensure that deserving students do not have to miss out on the chance of getting a higher education due to lack of funds. Having said that it important to mention that to be eligible for these loans certain conditions have to be fulfilled just like getting into a good college requires certain basic conditions to be met. A good credit history is a must for anyone seeking any loan and the same applies to an education loan too.
Whenever any lender extends any credit they want to ensure that the person they are lending to has the intention and as well as the capacity repay the dues on time. The capacity to repay the loan can be judged by looking at various financial parameters like the current income, expenses, and overall debt obligations and so on. However there might be instances when the borrower may not pay even though they have the financial capacity to do so because they do not have the intention to do so.
This can be especially a challenge in the case of an education loan due to two reasons. The first reason being that these loans are unsecured which means there is no asset backing them unlike the case is when an auto or home loan is sanctioned. The second reason is the borrower needs to start the repayment after finishing his/her education and some moratorium time as fixed by the lender. So how does the lender ensure that they lend to a creditworthy candidate? The credit report of the applicant can help the lender decide about the creditworthiness of the borrower.
By looking at the credit trail the lender can make an educated guess about the likelihood of the borrower repaying his/her dues on time. The credit report gives details about all the loans and credit cards that the applicant had or still has. Based on the repayment history, card usage and various aspects the lender can estimate how disciplined and regular the applicant has been in treating their debt in the past. This also lets them estimate their creditworthiness and their likelihood of the borrower repaying on time or defaulting like they did in the past.
Bad credit or a poor credit history would raise red flags and the lender is not likely to take a favorable view on the loan application. A report which reflects missed or delayed payments, overuse of credit card, settled loans, too many running loans is definitely not going to help the applicant in getting his/her education loan sanctioned.
So not being able to pursue a course because you were not disciplined enough to repay your debts on time can be avoided if one is careful about their loans and cards right from the first one.
If for some reason your score is low than rather than looking for a loan for low CIBIL score one should try and work on improving it as a low score could mean a higher interest rate. However if you do not have sufficient time to work on improving the score (it is not something that can happen overnight) then you could consider the option of getting a guarantor, opt for a secured loan or take a loan against an asset like gold or loan. These options could save you from having to pay exorbitant rates on your loan. Also, make sure that you make timely payments for your loans and credit cards in future and follow the basics of being a responsible borrower.