Education loan eligibility for students: Challenges and solutions

Achieving academic goals is now easier for anyone with the required intellect and education loan eligibility. With public and private financial institutions offering the benefits of education finance, students have excellent opportunities to fund their education. They can work towards their academic goals even if their family income is insufficient to bear the college expenses.

Challenges in education loan eligibility
 

Ensuring education loan eligibility is easier said than done, particularly if you are a student with little or no financial track record. Challenges faced by students and their parents in meeting various education loan eligibility criteria include:

· Lack of credit history or CIBIL score
 

A credit score is an important criterion in determining loan eligibility. A poor credit score indicates the borrower's past inability to repay loans and dues. The challenge in getting an education loan is that a student is unlikely to have a credit score due to a lack of credit history. 

Known as the CIBIL score in India, the agency whose ratings are widely used, a credit score is a three-digit number. The better your credit track record, the higher your credit score. And the higher your credit score, the better would be your loan eligibility. As per CIBIL, the credit score is measured on a scale of 800. 

Also read: https://www.idfcfirstbank.com/finfirst-blogs/education-loan/documents-required-for-education-loan

· Limited income
 

The applicant's financial background, parents or guardians and co-applicants are thoroughly scrutinised before any financial institution lends money for education finance. Your financial background must be strong to get the loan approved and disbursed  easily.

Low-income applicants may be rejected if the lender doubts their repayment capacity. Such loan applications may be rejected under the education loan eligibility criteria.

· High-interest rates
 

The interest rate for students, particularly for unsecured loans, may be high. If the student fails to identify an affordable education loan, a high-interest rate may add to the cost of borrowing and inflate the EMI.

Even in this scenario, students with a low-income background may think twice after fulfilling the education loan eligibility.

· Unrecognised educational institutes
 

The reputation of the institution or the university where the student will take the admission also influences the education loan eligibility. If the lender recognises the institution, or the institution is accredited or has a good ranking, your education loan may be accepted.

Most lenders maintain a list of recognised institutes they refer to while determining an education loan eligibility. Institutes with poor placement records are also a potential reason for loan rejection. The admission letter issued by the institute or its equivalent must be furnished while applying for loans for education.

· Academic record
 

Lenders also scrutinise the applicant's past academic performance while finalising the education loan eligibility.

Someone with an average or below average academic track record may struggle to get their application approved. It is because lenders believe a strong academic record is linked to better job prospects [VC3] [s4] and, therefore, better repayment capacity.

Also read: https://www.idfcfirstbank.com/finfirst-blogs/education-loan/5-common-student-loan-mistakes-to-avoid

Solution to the challenges in education loan eligibility
 

As the saying goes, "Where there is a will, there is a way". For every challenge in your education loan eligibility criteria, you can address them with these solutions:

· Co-signers with good credit scores
 

A co-signer of an education loan can be the parent or spouse of the applicant or any other family member willing to help the student. A generally accepted credit score of 700 or more can be achieved to enhance education loan eligibility by adding a co-signer with good credit history.

It will boost your education loan eligibility and increase your chances of getting the loan sanctioned. Once a co-signer is added, the student and the co-signer are equally responsible for the loan repayment. Lenders may also decrease the interest rates on the loan if the credit history of the co-signer is impressive.

· Scholarships and grants
 

Scholarships and grants can greatly relieve students who want to pursue higher studies. They aid them by covering the full or partial expenses of the education, depending on the grant criteria.

To avail of such grants and scholarships, students must qualify for the benchmark set by the organisations or institutions offering them. It may include academic excellence, social or financial status, entrance or test scores, etc. A grant is a monetary award that does not require repayment and does not fall under the typical purview of an education loan eligibility criteria.

· Getting the right collateral
 

By arranging collateral, your education loan eligibility increases significantly and will likely be easily approved. However, the education loan application may only be accepted if the collateral is sufficient.

For instance, unconstructed land falling under Gram Panchayat or agricultural land may not be of sufficient value to meet the loan amount needed for overseas higher studies.

Also read: ​https://www.idfcfirstbank.com/finfirst-blogs/education-loan/education-loan-facts-you-might-not-know​​​

Conclusion
 

While addressing the challenges and seeking solutions, a student must ensure that the course and institute opted for are recognised by most lenders. They should also opt for bankers who offer the most convenient and affordable education loan products.

IDFC FIRST Bank Education Loan is available at attractive interest rates and on over 25,000 courses across 3200+ universities globally through a seamless loan application process. With IDFC FIRST Bank Education Loan, you can get a collateral-free amount of up to Rs 75 lakhs and repay at your convenience for up to 15 years.

Apply for an IDFC FIRST Bank Education Loan today to fulfil your academic goals.

Disclaimer

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