Education plays a direct role in your success- there are no two ways about it. However, what do you do when the lack of money comes in the way of receiving the education you deserve? Most students secure money for their expensive college tuition through an education loan. However, not all education loans are approved easily. In fact, the number of education loans that get rejected everyday is staggering.
Here are some of the common reasons why banks and other financial institutions may reject your loan application:
1. Poor Academic Performance
Academic performance is an important factor that influences your loan application. Sometimes students get admission in reputed colleges through reservation, but have a poor academic record. In that is the case, a lender may reject your loan application.
2. Nature of the Course
Lenders are often quite selective with their course preferences. Education loans applied for expensive courses such as medical or engineering are more likely to get a green signal in comparison to others. This is because it is assumed that since you are likely to receive good salaries after completing such courses, you are also more likely to repay the loan easily and in a short period of time. So, if you are applying for an inexpensive course then again the lender may turn down your application.
3. Assets and Family Income
Lenders also consider the assets owned by the family of the applicant, and the income of the parents. If they own real estate or other expensive assets then there is a certain sense of security experienced by the lender, and they are comfortable in approving the loan application.
The three reasons mentioned above are important. However, there is another major reason, perhaps bigger than the all three above, that may be the reason why your loan application is being rejected again and again. Your CIBIL score is highly influential in determining whether your loan application will be rejected or accepted.
Why a good CIBIL Score necessary to get an education loan?
Your CIBIL score is the score of your creditworthiness. In other words, if you have a high credit score then it means you are a responsible credit user, and are most likely to repay your loans or credit card bills on time. On the other hand, a poor score reflects bad credit management, history of missing payments, CIBIL dispute, etc.
When your score is below average then your profile is considered risky, and unless you are willing to accept an interest rate that is a lot higher than the standard (to balance the risk), your lender won't want to approve a loan.
Even if your score is decent, and your academic records are promising then also your application may get rejected. This is possible if your parents' CIBIL score is not up to the mark. Some banks consider the score of both the student and their parents. Thus, it helps to have a high credit score whether you are the applicant or the parent.
How can I Improve My Credit Score?
If your score is below average then you needn't worry. You can improve Cibil score easily. Although it may take a lot of time depending on how bad the score is.
Here are a few things you can do to improve the score:
· No More Late Payments: If you have an existing loan, or a credit card then make sure you make the payments on time. Timely payments have direct positive impact on your score.
· Checking for Mistakes: If you have been a responsible credit user in the past, and have never defaulted on a loan or delayed payments, then maybe you can check your credit report yourself. Sometimes a poor score could be the result of discrepancies or errors in the credit reports. If you find an error, you can get it corrected to improve your score.
· Cut down on Your Credit Usage: Excessive credit usage can be detrimental to your credit score. This often happens to those who own credit cards. If you have been spending too much using your credit card, then you can limit your usage to improve the score considerably.
To get any kind of education loan, a decent CIBIL score is a must. If you are about to apply for one, make sure you check your score first. With a good score you can improve the chances of loan approval to a great extent.