Thursday, 6 October 2016

10 Reasons Why Education Loans Are Rejected

The cost of education today is higher than ever. Especially if you are planning to study abroad then managing tuition fees, rental costs for accommodation, and other expenses can become a challenge unless you have an education loan. However, lending institutions are extra careful with education loans in comparison to other loans. This is because there is a greater risk involved in the former- the student can be difficult to track after they have finished their education, or they could default which would lead to an increase in the non-performing assets of the institution. Thus, every single education loan application is closely scrutinized before approval.
Banks, and other lending institutions have a variety of reasons to reject education loan applications. However, the most common 10 reasons are as follows-
1) CIBIL Score- The importance of CIBIL score exists not just with education loans but all kinds of loans. It is the most important factor that alone stands between the approval or rejection of a loan. Students often have a short credit history, which makes it difficult for a lender to trust them. However, if you have a good score, which is generally higher than 700, then you can have a good chance of getting the loan.
2) CIBIL Score of Parents- When you apply for a student loan then your bank could also check your parents' CIBIL score, especially if they are guarantors. If their score is low then your loan could easily be denied.
3) Income Of Parents- It may come as a surprise, but banks often take the income of parents into account when mulling over an education loan application. As a lender they don't want any risk, and if the parents' income is small then they can have a hard time getting the money back if the student ends up defaulting on the loan.
4) Academic Performance- If you have been consistently good at studies then you are likely to get the education loan easily, and it is not difficult to understand why. Good academic performance is a sign of discipline and hard work, which is why it becomes easier for a bank to trust you with their money. Similarly, if your academic track record is poor then your odds of getting a loan also become slim.
5) Nature of Course- If the course that you are applying for is a part-time/correspondence course then it can be difficult to get an education loan.
6) Type of Course- Students who apply for courses such as engineering, management, medical are able to secure a loan easily. This is because these courses enable them to get high paying jobs easily, which in turn makes it easier for a lender to get their money back. Less popular courses such as humanities, commerce, are not looked upon with confidence by banks, and thus become a reason for rejection.
7) Forget Documents- Cases where a student applies for a loan with forged or fake documents are not uncommon. This is not only illegal, but also a good reason for instant loan rejection.
8) Loan Amount- If you want an education loan for an amount higher than Rs. 7,50,000 then you have to offer collateral as well. Failing to do so can result in loan rejection.
9) Reputation of College- If the college where you will be studying is not widely recognized, or has association with poor track record then it can make your bank reject your loan application.
10) Age- Many banks make it a point to approve an education loan only if the applicant's age is less than 30 years. If you are older then you will have to convince your bank with your own efforts.
The list of reasons why education loans are often reject may appear daunting, but if you are a hard working and smart student then there is no reason to worry. Apply for an education loan with confidence, and keep an eye on loan status. Once your loan has been approved you can use tools like loan EMI calculator to structure it as per your needs.


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