Many students or employed individuals aspire to study abroad and make a mark in their careers. CIBIL score is one of the aspects that the lenders take into account while processing your study abroad loan application. It is crucial to know what a CIBIL score is and its influence while applying for a loan. However, sometimes, situations may arise where the students get stuck, when they have a low credit score. In this blog, we deal with ways to avail ourselves of an education loan with low CIBIL score.

Availing Education Loan with Low CIBIL Score

Credit Information Bureau India Limited is a company that keeps track of records of all those enquire about a loan or have taken in the past. Whenever a person approaches a lender for a loan, this information is passed to CIBIL, who will then include it in that person’s report, and will pass on this information whenever needed by a bank or relevant institution.

Importance of a Good Credit Score for Applying Education Loan

For taking an education loan, either the borrower or the co-signer’s CIBIL score is required by the lender. Based on this score, the lenders decide on the loan amount and other added benefits like:

Availing a higher loan amount

Lower rate of interest

Longer loan tenure

Quick processing of education loan

Education loan without collateral

Helpful for prospects of availing any other loan in future

Reasons for Changes in Cibil score

Your CIBIL Score is generated by a scoring algorithm which takes into account a large number of data points and macro-level credit trends. Periodic changes to the algorithm need to be done to incorporate new data points and trends in order to make CIBIL Score more comprehensive and continue to enhance the score’s ability to predict the probability of default on loans, a consumer’s credit-worthiness and his/her likelihood of repaying a loan.

Steps to Improve an CIBIL Score

You can improve your CIBIL Score by maintaining a good credit history, which is essential for loan approvals by lenders. Follow these 6 steps which will help you better your score:

Always pay your dues on time: Late payments are viewed negatively by lenders.
Keep your balances low: Always be prudent to not use too much credit, control your utilization. Maintain a healthy credit mix: It is better to have a healthy mix of secured (such as home loan, auto loan) and unsecured loans (such as personal loan, credit cards). Too many unsecured loans may be viewed negatively.
Apply for new credit in moderation: You don’t want to reflect that you are continuously seeking excessive credit; apply for new credit cautiously
Monitor your co-signed, guaranteed and joint accounts monthly: In co-signed, guaranteed or jointly held accounts, you are held equally liable for missed payments. Your joint holder’s (or the guaranteed individual) negligence could affect your ability to access credit when you need it
Review you credit history frequently throughout the year: Monitor your CIBIL Score and Report regularly to avoid unpleasant surprises in the form of a rejected loan application.

Correct the Errors on Your Credit Report

The first thing that you can do after checking your credit score is to go through your credit report carefully. If you see any enquiries that were not authorized by you, raise a dispute and get them rectified.

Make Timely Payments

Pay your loan EMIs and your credit card bills on time and in full every month. Missing payments affect your credit score negatively.

In case you are having a hard time paying your bill in a certain month, consider paying at least the minimum amount by the due date.

Take Starter Loans

If you are completely new to credit, or your credit score has taken a hit due to unavoidable circumstances, consider taking a small personal loan. The interest rates might be high, but if you continue making the payments on time, you will be able to build your credit score slowly.

Limit Your Loans

Taking too many loans at once, or even making too many hard enquiries during a short period of time may affect your credit score. These enquiries stay on your report for the next 7 years, which will make procuring a loan difficult.

Diversify Your Credit

To build a good credit score, only taking one type of loan is not enough. Add variety to your credit report responsibly by utilizing credit cards, and secured, and unsecured loans.

Maintain Your Credit Utilization Ratio

Your credit utilization ratio is the ratio of your credit available to the credit utilized, which should ideally be kept under 30%.

It is calculated by accounting for all the credit cards you own. Exceeding this limit may make you look credit hungry, and affect your credit score negatively.

Don’t Settle Your Loans

If you are unable to pay your dues, the bank may often offer to settle the loan. By making a small one-time payment, your loan is considered settled. But this affects your credit score the most.

In case you have any old loans that you had settled, contact the lender and pay the dues so it can be closed.

Plan Your Loans in Advance

Applying for loans irresponsibly may get you in trouble while paying the EMIs. Use an EMI calculator to calculate your EMIs beforehand, and plan your loans in advance. That way you will be able to make timely payments and improve your credit score.

Process to Get an Education Loan with Low CIBIL Score

Ever had this constant worry of your loan application getting rejected due to backlogs while pursuing the higher education of your choice? With Qck Loans, you no longer must worry about letting past academic glitches dull your future! In a place like India, where education is highly revered and valued, opting for a study loan can be your golden ticket to reaching desired milestones. Now is the time to throw away all your concerns about academic backlogs hindering your loan application initiation.

Approaching specialized lenders, who aid students and their consigners for an education loan with low CIBIL score is another effective option to look for. A word of advice while approaching them is to build a strong case of reasons for the low credit score, that is persuasive to the lenders for them to build a trust in you and provide you with the loan.

Another alternative is to apply for an education loan with collateral, where lenders provide these kinds of loans with a surety of repayment of loan from the borrower. With a collateral attached, you can increase your chances of availing an education loan with low CIBIL score. For lenders, there is lesser risk attached to these types of education loans, where in case of unforeseen circumstances, the lender can auction the collateral and recover the money in question.

You can also get scholarships or financial aid grants that help you achieve your goal of studying abroad, without the need for an education loan with low CIBIL score.

Factors leading to Low credit Score

There are instances that affect your credit score unknowingly. Hence it is important to be mindful about a few of them and ensure that you do not fall under the radar where your credit score gets affected. Avoid situations as these, that result to low credit ratings:

Missing late payments of your loan or other credit payments. Ensure to make payment before or on the due date.

Your debt being passed on to collections is another factor.

Defaulting on loan or credit card EMIs.

If you have a total debt amount, higher than your income, it shows as red flag to your lenders.

Having no or a small credit history, makes it difficult to provide you with loans in future.

Applying for multiple loans or credit requirement within a single span.

Challenges faced Availing Education Loan with Low CIBIL Score

With a low credit history, both borrowers and lenders face challenges in availing and lending loans respectively. Here are some challenges faced by both parties:

Lenders are at greater risk of facing a default payment from the borrowers, given their reputation for creditworthiness. Such lenders, altogether avoid processing an application to mitigate the potential loss they may incur in future.

Lenders impose strict eligibility criteria for borrowers with bad credit. Some rules include higher income brackets, more documentation, double checks in approval process, requirement of a co-signer or a collateral.

With the higher risk attached to low credit score, there are lesser loan options for the borrowers. Conventional lenders in the country may hesitate to lend money, whereas a few specialized lenders for low CIBIL score borrowers are available who can take the risk of lending with strict rules, higher interests and loan limits.

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Conclusion

By carefully considering these factors, you can make informed decisions to reduce costs and improve your chances of securing an education loan at a low interest rate. Qck loans are also a great option for students needing faster access to funds. With strategies like negotiating with lenders, researching and comparing options, and considering government-backed loans or scholarships, you can ease your financial burden and focus on achieving your educational goals.

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