Know the Reasons Why Your Education Loan Application Got Rejected

    Updated on: 11 Aug 2022


    According to IBA, the non-performing assets (NPAs) in the education loan category was 9% by the end of 2018. The NPAs, in March 2016, was 7.3%. IBA data also states that at the end of the FY 2017-18, the total outstanding education loan amount in the country was Rs 71,724.65 crore and out of this Rs 6,434.62 crore was NPA. The numbers speak for themselves and give us an idea of why banks have become strict and extremely vigilant when sanctioning education loans for abroad study. Hence, we come across a lot of cases where a student’s loan application has been rejected. Often, this happens because of minor mistakes while applying for the loan and the student has to face the repercussions and many times even give up on his/her study abroad dream. Education loan rejection reasons can be many. For the benefit of our readers who might be considering applying for an education loan, let us take a look at the various reasons why an education loan application is rejected.

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    What Are The Reasons Your Education Loan Application Got Rejected?

    1. Low CIBIL Score of the Student or his/her Guarantor

    A CIBIL score is one of the most important benchmarks considered by any credit lender. A good CIBIL score of a student means that he/she has repaid their previous loans on time and thus increase their chances of getting the education loan. Similarly, banks also consider the CIBIL score of the applicant’s parents or guarantor(s). This is done to ensure that the parent or guarantor is able to repay the loan in case the student is not able to. Hence a good CIBIL score of your parents or guarantor will increase the chances of getting a loan and vice-versa. 

    2. Past Academic Performance of a Student 

    The student’s past academic performance is another very important parameter that is considered by banks while sanctioning an education loan. A student who has consistently performed well in the past and has gained admission to a premier institute has increased chances of getting an education loan. On the contrary, a student who has been average or below average, or has received admission into a premier institute under the management quota will have a higher chance of his/her education loan application being rejected. This is because banks believe that such students have lower employability and that they might not earn enough money after their course to repay their loans. 

    3. An Unrecognized or Unaccredited Educational Institute 

    Banks often reject an education loan application for students seeking admission to unrecognized institutes or institutes that do not have a good placement record. Students have to ensure that they apply to recognized institutes only in the hope to get an education loan. This is also important for their degree to be recognized by prospective employers, and ultimately their employability. 

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    4. The Course Being Applied To 

    Banks easily sanction an education loan for courses that have a high earning potential. Courses such as engineering, management, medicine, etc. have a high earning potential after graduation and banks assume that students pursuing such courses will be able to repay their education loan on time. It should also be remembered that banks usually do not sanction loans for correspondence courses, part-time courses, and distance learning.

    5. Incomplete or Fake Documents

    There is a lot of documentation involved when applying for an education loan and every document gets minutely scrutinized by banks. Students applying for an education loan must be meticulous in submitting every document that the bank requires and ensure that they submit the correct documents if they want to increase their chances of getting an education loan. Else, the chances of their loan application getting denied are quite high. Also, banks reject loan applications for students who have submitted fake documents. Banks take this quite seriously and reject the loan application outright.

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    6. Type of Loan

    A secured education loan gets sanctioned more easily than an unsecured education loan. A non-Collateral Education Loan is harder to get, especially if the loan amount is high. Education loan without security is sanctioned only if the student is able to meet conditions like high CIBIL score, high academic scores, admission to a reputed institute, original and complete documents, etc. However, students applying for secured loans too have their applications rejected. Some common causes for this are attaching agricultural land as collateral, or land that falls under Gram Panchayat’s jurisdiction. Students attaching a property that is disputed, not submitting past sales deeds if the property has been owned for less than 30 years, and others. 

    7. An Absence of Admission Letter from the Recognized University or Institute

    Banks require a letter of admission (a soft copy is enough) before sanctioning the education loan, the absence of which decreases the student’s chances of getting an education loan. 
    Now that you know the common reasons why an education loan application might get rejected, apply wisely. Of course, you can always apply for your education loan at GyanDhan, and let us worry about securing that loan approval - at no cost to you

    How can GyanDhan Help you with your Abroad education loan?

    While there can be many reasons for rejection of loan applications, some of them are fixable to get an education loan approved. And we can help you fix them. When you apply for an education loan through GyanDhan, we make sure the loan application will have negligible chances of rejection. Since we work closely with these lenders, we are aware of the reason why these education loan applications are rejected.

    An SBI or BOB education loan rejection can be because of wrong/incomplete collateral papers. This would require you to submit the right property documents. An Axis Bank or ICICI Bank education loan rejection can be because of the chosen college or university. HDFC Credila, InCred, or Avanse education loan rejection can be because of the co-applicant profile or CIBIL score. Whatever may be the reason for rejection, it will be singled out and corrected even before the application reaches the lender ensuring the loan application is approved.
    So, contact us now or check your loan eligibility here to get your abroad education loan application approved the first time!

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