How to Get an Abroad Education Loan with Low CIBIL Score?

When a student is preparing for education abroad, they prepare for scores, letters of recommendation, and statements of purpose; they often lack guidance when it comes to the financial aspects. However, when things move forward and they apply for the education loan, they usually forget one thing: their CIBIL score. The CIBIL score required for an education loan is the primary factor that the lender verifies. Financial institutions often look for a credit score of 750 or above, as reported by CIBIL. If you have never withdrawn an education loan your CIBIL will be 0 or -1. Still, to understand the CIBIL score to the cor,e you can use the below information. 

When a person withdraws a loan or gets a credit card, they create a financial history. However, the CIBIL score is built based on your repayment information whenever you borrow money. The CIBIL Credit score is a summary of your entire credit history in the form of a three-digit number. It normally ranges from 300 to 900 and is a representation of your creditworthiness. A higher score indicates that you are a less risky borrower, increasing your chances of availing a loan, whereas a lower score decreases that probability.

 

During the education loan, CIBIL score isn’t the primary factor that is verified. Instead, lenders check your Credit Information Report (CIR). The repayment history shows how good you are with your finances.

 

A credit report typically includes information such as personal identification details, credit accounts (credit cards, loans, mortgages), payment history, credit utilization, credit inquiries, and public records (such as bankruptcies or tax liens). This history is even used to check and confirm the obligations you have on your income. So, if you still think that, Is CIBIL score required for education loan? Of course! Yes.

Four Information Included in Your Credit Report:

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  Personal information: Name, address, PAN no, date of birth, and employment information.

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  Credit history: Types of accounts, date of account opening, credit limit, account balance, payment history.

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  Public records: Garnishments, foreclosures, legal suits, and judgments.

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  Inquiries: List of lenders that have checked the individual's credit report in the past.

Your Credit Information Report (CIR) and six months of financial data are used to calculate the CIBIL score. The CIBIL algorithm calculates the CIBIL credit score based on 258 different variables, each having an appropriate weight. But the five primary factors that can be controlled by you are mentioned below:

 

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  Applicant’s repayment history: The credit score is mostly a reflection of how promptly you have repaid your debt. Any default in the credit card payment or loan repayment will negatively affect the CIBIL score.

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  Credit utilization limit: Using credit more than the credit limit also negatively affects the CIBIL score. It reflects poor spending habits.

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  Duration of using the credit: In simple terms, it means the total number of years the credit account has been open. A long and positive credit history will help the lender make a quicker decision on the credit application.

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  Paying the minimum amount due: Chances of falling into a debt trap increase exponentially if you only pay the minimum amount due every month. Interest will keep compounding on the remaining balance. Further, it reflects poorly on repayment behavior.

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  Credit mix: it is important to have a healthy mix of secured and unsecured credit. It is looked at by the lenders positively as it shows that you have experience in handling both types of credit. Furthermore, having only one type of credit can affect your credit score negatively.

When applying for an education loan, especially unsecured education loans, the co-applicant or guarantor's CIBIL score (or credit score) becomes a critical factor. It indicates the creditworthiness of the borrower and/or co-applicant. This also impacts the approval and terms of the loan.

Step-by-Step Process to Check CIBIL Score:

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  Visit the CIBIL official website.
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  Click on 'Get Your CIBIL Score' present on the homepage.
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  Fill in the personal details that are asked for.
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  After entering your details, answer a few security questions to verify your identity.
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  Choose a subscription plan, however, it offers both free and paid plans:
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  Once the verification is complete, you can view your CIBIL score and download the credit report.

Alternative Platforms to Check CIBIL Score:

Besides the CIBIL website, you can also check your CIBIL score through various third-party financial service providers like:

 

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  Paisabazaar
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  BankBazaar
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  CreditMantri
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  IndiaLends

Many of these platforms offer free CIBIL score checks without affecting your credit rating.

CIBIL scores can vary from 300 to 900, with 900 indicating the highest level of creditworthiness. Having a CIBIL score of 750 or above on your credit report is ideal, as it enhances your eligibility for loans and credit cards.

There are both pros and cons of the education loan CIBIL score which you might not know. We have listed them below:

When you are applying for a loan not just an education loan, the CIBIL score impacts your approval and interest rate. Statistics show that on average, 90% of the loans are granted to applicants with a score above 750. The higher the score, the higher the probability of getting your loan approved, and a study loan is no exception to this rule. Having a good credit score has its perks including:

 

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  Lower rate of interest
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  Quicker approval with less documentation
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  Higher loan amount
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  Higher card limit
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  Longer tenure

Thus, when it comes to education loans, the CIBIL score is a crucial factor in the loan approval process. The minimum CIBIL score for an education loan is 650.

 

The majority of the students might not have taken a loan or credit card in the past and thus don’t have any credit history. In such cases, when they apply for an education loan, the lender checks the credit history of the co-applicant who usually are, their parents. Thus, if the parents have a low CIBIL score, there is a high chance that the loan can be denied.

 

One of the most popular questions related to low CIBIL scores is - “Is CIBIL score required for education loan ?” All the reasons mentioned above answer this question. Yet, the most basic thing that people are confused about. Can a student withdraw an education loan without CIBIL score? So, the answer is that when the student or co-applicant doesn’t have a credit history.

 

The CIBIL score becomes 0 or -1 which is considered positive and the loan is approved quickly in this case. These scores are considered equivalent to the 750 CIBIL score therefore, you don’t need to run for a credit card to get an education loan. 

If you are applying for an education loan with low CIBIL score then you can apply for a minimum CIBIL score for education loans is 650. However, even at CIBIL 650, it will be very difficult for you to get an education loan. CIBIL scores above 700 are generally considered for an education loan. For low CIBIL scores, lenders charge high interest rates, which can cost you lakhs in the long run. 

If you are applying for an abroad education loan with low CIBIL score then you can use the following ways to avoid rejection from the lender:

Proof of Income:

A good income will prove to the lender that the applicant can repay the loan. Even with a bad credit score, proof of income shows that the borrower is adequately financially stable to repay the loan.

No Objection Certificate:

Sometimes, the CIBIL score is affected if you miss the credit card bill payment on time. Thus, it impacts your credit score. You will become an education loan for CIBIL defaulters in a day. To avoid thi,s you can get the No Objection Certificate (NOC) from the lender to get your approval letter. 

Change the Co-Applicant:

Many lenders consider spouses, siblings, and other blood relatives as co-applicants. So, if your current co-applicant has a low CIBIL score, then you can change the co-applicant to make your loan application better. 

Secured Loan:

Secured loans are already safeguarded using the asset; hence, using the secured loan option, you can get an education loan. In a secured loan, the co-applicant's financial profile is not the primary factor but a secondary factor that might influence it. But it won’t have too much impact. 

Resolve Credit Report Errors:

The best method to ensure your bad credit score doesn’t ruin your chances of getting a loan is to resolve the errors. A mistake or an error in the report can also occur. Review your credit report every six months to ensure this doesn’t happen again.

Apply to NBFCs:

Banks tend to scrutinize the loan application rigorously. Whereas, NBFCs might relax some policies if the student’s profile is outstanding.

 

It is a little difficult to get an education loan for a low CIBIL score, but fortunately, not impossible. Here are some tips on how you can avail abroad education loan when you have low CIBIL score: 

 

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  Strong Academics: Healthy and strong school records stand a great chance of increasing the probability of approval of your loans.

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  Institution’s Reputation: Loans for studies at well-known and esteemed institutions are regarded favorably, more than at other institutions.

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  Course Category: Approve a loan for professional courses with high chances of getting a job, like an MBA.

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  Borrower evaluation: Lenders will check your earnings and financial soundness in finances to gauge your ability to repay.

If you have a low CIBIL score but require an education loan to pursue your higher education abroad, so, here are some alternative lending options through banks. These lenders are more flexible and offer education loans even to students with lower credit scores.

Non-Banking Financial Companies (NBFCs):

A non-banking financial institution is not legally a bank, however, it is regulated by the national and international banking agencies. It has some lenders who accept education loan applications if an applicant has a low CIBIL score.

 

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  Credila: They specialize in education loans and provide funding to students with low CIBIL scores.

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  Avanse Financial Services: Known for offering education loans to students with a CIBIL score below 650, focusing on merit-based decisions.

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  Incred: Provides loans to students with lower CIBIL scores, particularly for postgraduate courses and professional studies abroad.

Private Lenders:

Some fintech lenders like Auxilo, TATA Capital, and MPower also provide education loans. They have their set of eligibility criteria and categories, which help many low CIBIL students secure an education loan. 

 

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  Auxilo: It offers customized education loan solutions, thus offering a broader set of factors like future earnings and course relevance, not just CIBIL scores.

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  TATA Capital: Offers loans for education abroad with flexible terms and has competitive interest rates. Students who have lower credit scores require a co-applicant with a stronger financial profile.

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  MPower Financing: This has a unique approach, offering loans to international students with a limited or low CIBIL score, especially focusing on students from developing countries.

Education loan with low CIBIL scores are not impossible to get however, they also come with lots of challenges. They are as follows:

 

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  High Risk for Lenders: Providing an education loan with low CIBIL score is a risk for the lender. This makes the lenders hesitate to approve the loan application and increases the processing time.