Education is important, there is no question about it. However, higher education can be quite expensive which is why many students take education loans, especially when they want to study overseas. But is obtaining a student loan that easy? The answer, unfortunately, is “no”.
Almost every traditional lender or bank checks the credit score of a loan applicant whether it’s a personal loan or an education loan. This is an important part of the process as it allows them to assess the risk factor of an individual i.e. how likely they are to repay the loan. So, if your credit score is high, then you can get a loan easily. However, if your score is low, then your application might be rejected.
The problem with a education loan is that the majority of students don’t have a credit history at all. This is because they don’t earn money and they don’t need a loan either. So, when they need an student loan, a bank gives them two options:
Most students choose the second option as its safer. However, this doesn’t mean that it’s an easy way to get the loan. This is because, in this, the bank checks the cibil report of the co-applicant i.e. the parent or guardian. So, if their cibil score is poor or if their name is found on a loan defaulter list, then it can lead to loan’s rejection. Ideally, their score should be at least 750, although they might get a loan even if it’s above 550.
If you need a student loan but your parent’s credit score is not up to the mark, then you can choose either of the following:
A secured loan is much easier to get than an unsecured or standard loan. This is because in a secured loan, the risk is lower on the lender’s end. However, you must have collateral to offer which could be real estate, stocks, etc.
This is the era of fintech in which more and more non-banking financial companies (NBFCs) are emerging in the industry with original and flexible financial products. For instance, there are a number of peer-to-peer (P2P) platforms that offer personal loans and student loans online for easy accessibility and disbursal. These platforms are more forgiving than traditional banks. So, even if your parents’ cibil score is low or their name is on a loan defaulter list, you still get a loan. In fact, it’s very much possible that you get a better interest rate than a brick-and-mortar bank along with a flexible repayment option.
If there is plenty of time before you need a student loan, then your parents can also use this time to increase their Cibil score. This way, by the time you will apply for the loan, their score will be high enough for your bank to approve it easily.
The following are some of the things that your parents can do to increase their Cibil score quickly:
There are many other options that you can consider as given above. Otherwise, you can also consult a credit expert. Good luck!