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Importance of CIBIL score in Overseas Education Loan

You have likely been bombarded with references to "CIBIL Scores" and "credit histories." Your creditworthiness is quantified by a three-digit number called a credit score. A credit score is a three-digit number between 300 and 900 that signals to lenders your likelihood of paying back loans. Does your CIBIL score affect your student loans for studying abroad? Yes, it does. 

The Importance of Your CIBIL Score When applying for a Student Loan

One of the most significant considerations in deciding whether to study in one's own country or elsewhere is the availability of financial aid. As the expense of higher education continues to rise, students may find that education loans are their saving grace. While several factors go into determining whether you are approved for a loan, your credit history and credit score (CIBIL) are two of the most significant factors.

If a student does not have a CIBIL score, the lender will use the CIBIL scores of the other borrowers to determine the terms of the loan. Having a high CIBIL score and meeting the lender's other qualifying standards improves a student's chances of receiving financial help.

The CIBIL scores of the other borrowers will be used by the lender if a student does not have one. Students who have a good CIBIL score and meet the lender's other criteria have a better chance of receiving financial aid.

Understanding How Your Credit Score Affects Your Student Loan

The answer to the question of whether a student loan would affect your CIBIL score is "yes." Paying on time or falling behind on student loans, like any other debt, can have a favorable or negative effect on your credit score. Most student loans for studying abroad have monthly or biweekly payments spread out over a certain number of years. To assist you build credit, the lender will report this to the major credit agencies.

A good credit history begins with on-time payments. Students looking for an international student loan are advised to maintain the following CIBIL scores:

300-599: Check your financial records for immediate problems that could be affecting your CIBIL score if they are in this range. There is little hope of getting a student loan if your Credit Information Bureau of India Score (CIBIL) is below 600.

600-749: A CIBIL score at this level is still good enough to qualify for a student loan. There is a minimum CIBIL score that most banks and NBFCs require for students to be eligible for a loan, and most of them are strict about it. 

750 and above: A student loan is easily obtained by those with a CIBIL score of 750 or better. Lenders may look at the CIBIL score to determine how creditworthy each applicant and co-applicant is.

How Can you Improve your Credit Limit?

Your CIBIL score is low because of the following, and you should take the following steps to raise it:

Overusing Credit Limit: The inability to control expenditure is shown in the usage of one's available credit to its fullest extent. Spend no more than 30–50% of your available credit at any given time. This will help you maintain a low credit use ratio and a high credit score.

Late and Failed Payments: Your CIBIL score will drop if you have a history of paying late or missing payments on loans or credit. Remind yourself regularly to pay back any debts, and you'll improve your credit rating, which can lead to lower interest rates and better terms on future borrowing.

Rejected Loan Request: A loan application that is initially declined should be followed by a period of waiting. New loan denial is more likely under these conditions because your credit score decreases after each application is turned down. Prioritize improving your credit score so you can get the loan you need. Afterward, you'll be able to submit a loan application with more favorable terms.

You can still acquire a student loan even if you have a low CIBIL score; however, it will be easier to comprehend if we look at an example first.

Even if you have poor credit, you may be able to obtain a loan by providing collateral that the bank will keep until you have repaid the principal and any accrued interest. However, the approval procedure for such a loan may take longer and be more difficult. It's also possible that you won't be offered any better terms than what you already have when looking for a loan. The terms of repayment for some of them may be more onerous than usual.

A low CIBIL score makes it difficult, but not impossible, to secure a student loan. These tips can help you apply for a student loan if your credit score is between 600 and 700.

On-time Payment of Current Expenses: If you have a history of timely bill payments, including utility bills, credit card EMIs, and credit card payments, you will have an easier time getting a loan. For this reason, it is advisable to pay off all outstanding debts before applying for a student loan.

Show Proof of Income: The candidate's steady income guarantees their ability to pay back the loan. In the event of a low credit score, evidence of income indicates that the borrower still can repay the loan.

Apply for a Secured Student Loan: With a secured student loan, your credit rating will be one of several factors considered. The promised asset must be of sufficient value. A borrower with bad credit could be approved for a loan if they produce enough collateral.

Repair Errors on Your Credit Report: The best strategy to ensure that a low credit score doesn't ruin your loan application chances is to fix the errors that contributed to it. The report may contain a clerical or factual error. Make it a habit to check your credit report once every six months to prevent this from happening again.

Considerations Before Filling Out a Student Loan Application:

The following are four things to think about how to get an education loan for study abroad: 

1. Before applying for a student loan, make sure you have taken the appropriate steps and fully grasp the material covered in your college classes.

2. Don't forget to check your CIBIL report and score whenever you apply for a loan from a bank or other financial institution.

3. Keep a close check on the total amount you borrow and the terms of the loan.

4. Think about interest rates and moratoriums thoroughly.

An End-to-end solution for your questions about how to get an education loan to study abroad. Elan Education Loans offer a variety of other services. Not just to secure a loan, but to also assist with scholarships, foreign exchange, travel insurance, and overseas SIM card. Our assistance extends beyond helping you find a suitable financial institution; we will also walk you through every stage of the loan application and approval procedure.

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