The demand for education loans is rising at a very high rate as the cost of pursuing studies in India or abroad has risen significantly, and so is the list of defaulters. So before approving any loan, banks scrutinize the application very minutely and then take a decision to approve or deny. So following are the major reasons for rejection of an education loan. These following reasons are to be kept in mind so that the chances of getting your loan application rejected reduces.
- CIBIL Score of Student
A Credit Score or the CIBIL Score is a three-digit numeric summary of your credit history. The score is derived using the credit history found in the CIR. A CIR is an individual’s credit payment history across loan types and credit institutions over a period of time. A CIR does not contain details of your savings, investments or fixed deposits.
Usually, students do not have a credit score but some of the students do have a credit score. There are students who start earning while studying and buy a credit card and spend heavily and do not pay the monthly bills on time. This affects their credit score heavily, and banks avoid giving loans to people to with a bad credit history.
So make sure that you have a good credit history when you go for applying for an education loan. There is no need to worry about the students who have no credit history. But for those who have a bad credit history then credit score becomes a roadblock for them in applying for an education loan.
- CIBIL Score of Parent
CIBIL Score of a parent is a much more important factor than the CIBIL Score of students for the banks for deciding whether to approve or reject the application. Parents are the guarantors for the loan as they will be the ones who will repay the loan if the students is unable to repay it.
So in case, your parent has a poor CIBIL score then there are full chances that the application gets rejected.
- Recognition of the college
College recognition is also important. If you are planning to get the admission in a college which has low placement records then the chances of rejection increases, Banks have become more alert while granting loans and they are putting all efforts to reduce the number of defaulters. So they look on all possible matters that might lead to an increase in their non-performing assets.
And if you get into IITs, IIMs, and other top institutions then you will have high loan approval chances.
- Academic Performance
If you have got admission in the college through some quota then there are chances that the bank might reject your loan application. The banks assume that you might not focus on studies and end up being unable to pay the loan. So it’s better to have a good academic record so that your loan gets sanctioned easily.
- Course applied
If you apply for a course in the field of management, medicine or engineering then the chances of acceptance of your loans increases. This is because the earning potential of students in this field is high. On the other hand, if you apply for a loan for pursuing courses such as arts then you might face a rejection, as income is considered to be on a lower side after course completion.
- Type of course
Banks deny loans if you apply for education loan for distance learning/part-time/correspondence course. Lending institutions ideally offer loans to students who are applying for full-time course only.
- Fake documentation
If you give fake documents required by the bank like mark sheets, degree, college approval letter for an education loan, then straight away your application will get rejected. You might also have to face legal consequences for it.
- Loan amount
Collateral of suitable value and joint borrower are must when applying for a loan amount greater than Rs. 7.5Lacs. If you are not able to submit the same then banks will disapprove your application. This is because failure in loan repayment will force the bank to sell the security for recovering their lost money. However, if the loan amount is less than 4 Lacs then there is no need to submit any kind of collateral but parent/guardian are required to be your joint borrower. For loan amount ranging from Rs. 4 – 7.5 Lacs, collateral and a joint borrower is a must.
Education loans in India are provided to only Indian students. If you are an NRI or student from a foreign country then banks will deny your application.
- No admission letter
While applying for an education loan, you do not have the admission letter from the college then your loan application gets rejected.