Finance

How Does CIBIL Score Matter in Education Loans?

Usually, the cost of pursuing higher studies abroad is quite expensive and to pay for it many aspirants look for external financing such as an education loan. For instance, the cost of pursuing a course in the United Kingdom can cost anywhere between Rs.19 lakh and Rs.39 lakh based on the selection of an academic course and University.

However, the chances of availing such a loan depends significantly on the CIBIL score of the guarantor backing up the applicant. It is because the score serves as a summary of an applicant’s credit history and his/her track of previous repayments.

Consequently, financial institutions prefer applicants who carry a credit score of more than 750. It often limits the chances of many in availing loan approval, restricting them from funding their higher studies abroad.

Nonetheless, with the availability of secured financing options like education loan against property, individuals may avail funds at a low credit score. Furthermore, such a funding option extends user-centric features and benefits that allow individuals to meet their requirements quickly.

CIBIL score and education loan against property 

One must, nevertheless, note that a high CIBIL score can come in handy in more than one way for borrowers. For instance, individuals with a high credit score are more likely to secure a lower interest rate and better terms of repayment than most others.

Also, there are plenty of ways through which one can improve his/her current CIBIL score eventually.

Nevertheless, one must become familiar with the factors that impact the CIBIL score. For instance, the following factors impact one’s CIBIL score to a great extent.

  • Repayment history accounts for 35% of this rating.
  • Credit utilisation ratio makes up 30% of the score.
  • Loan tenure acquires 15% weightage.
  • Credit mix and CIBIL score enquiry makeup for 10% of this score.
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One can take measures to improve this existing credit score by taking care of a few factors. The most effective means include –

  • Repaying debt in time.
  • Keeping credit utilisation ratio below 50%.
  • Maintaining a diverse credit mix.
  • Limiting the number of loan applications at a given time.

Hence, individuals with low credit scores can avail an education loan against property from a lender who extends credit against a low CIBIL score requirement. Nevertheless, individuals may consider improving their credit score through healthy practices for financial management and avail multiple benefits while applying for a financial product.

Education loan against property – A better alternative to finance higher education

The following few features make an education loan for abroad studies a suitable financing option.

  • Simple eligibility 

Being a secured credit option, a loan against property is made available at simple eligible criteria. For instance, leading financial institutions consider salaried applicants between the age of 33 and 58 years with a stable source of income eligible for this loan.

Also, the CIBIL score requirement for an education loan against property is comparatively lower than most other unsecured financing options. Nonetheless, one must check education loan eligibility against the property before applying for it to minimise the risk of rejection in general.

  • High loan value with zero restrictions to use

Leading financial institutions provide up to 75% – 90% of the mortgaged property’s market value as the loan amount. Notably, this amount can go up to Rs.3.5 crore for self-employed applicants and Rs.1 crore for salaried employees.

The best feature of this loan is that it does not impose any restriction on how the borrower uses these funds. It allows students pursuing higher studies abroad to account for expenses like – food, lodging, transport, stationery, etc. Consequently, it will enable students to manage their finances better while studying abroad.

  • Flexible repayment tenure
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Leading financial institutions offer this credit at flexible repayment tenure that allows borrowers to plan their repayment and streamline it accordingly. For instance, usually self-employed applicants get up to 18 years to repay the loan.

However, one must note that the tenure plays a significant role in deciding property loan interest rate and monthly EMIs. So, one should factor in those aspects as well to make the most of such financing before applying for a loan against property.

Other than these, leading financiers also extend additional facilities like loan balance transfer and top-up loans. With a balance transfer facility, one can lower their loan burden by switching to a new financier. Likewise, the top-up loan feature helps them to avail additional funds to meet ancillary requirements.

Also, the lenders provide tailor-made pre-approved offers to customers that make the process of availing a financial product less time-consuming and simple. Usually, these offers are available on multiple financial products like loans against property and home loans. You can check your pre-approved offer by sharing details like name and mobile number.

With all these aspects in mind, individuals can proceed to apply for a suitable funding option, preferably a loan against property, to fund higher education. Simultaneously, they must also make proper arrangements to ensure timely repayment of the advance and improved financial management.