For every academic year, hundreds of thousands of students apply for education loans. There are various conventional reasons for loan application rejection. If you are looking for student loans for studying abroad
, then this article has got you covered with the leading factors that result in an education loan rejection.
Key Factors that Result in Education Loan Rejection
1. Low CIBIL Score
Education loans are provided based on the creditworthiness of the borrower. The best way to calculate the creditworthiness of the borrower is the CIBIL Score. A good CIBIL score indicates that the borrower has repaid their previous loans on time, this increases the chances of loan approval. However, low CIBIL scores lead to loan rejection. Some of the major reasons for low CIBIL scores are delays in EMI payments and credit card payments and check bounce history. Avoid these mistakes so that you maintain a good CIBIL score.
2. Incomplete or Fake Documents
Documentation is an integral part of the loan application process. Hence incomplete or fake documents are among the common reasons for education loan applications rejection. There are umpteen documentations that need to be taken care of, make sure that you don’t miss any of the documents. This can lead to loan application rejection.
3. Country of the Institution
Overseas education loans are of two types, secured and unsecured education loans. Secured education loan is mostly sanctioned for all study destinations. Many financial institutions also reject loan applications based on study destinations. Some of the leading study destinations that are on the list of financial lenders are the USA, UK, Canada, Australia, New Zealand, Ireland, Germany, and France. For these countries, you can easily get collateral free education loan for abroad
4. Academic Performance of the Student
Students’ past academic performance is an important parameter that is considered by financial lenders for loan applications. Inconsistent or poor academic performance would increase the possibility of education loan rejection. Backlogs and academic gaps are also considered while evaluating the student’s academic performance.
5. Numerous Loan Enquiries and Applications
Every time you enquire and apply for a loan, the financial institution will check your credit report. These applications reflect in your credit report. Multiple loan applications make a negative impact on your financial creditworthiness. This will also lower your credit score and therefore lead to loan application rejection.
6. Institution not Recognized
For unsecured overseas education loans, the authentication of the institution is an essential requirement that can affect the loan application. High-ranked institutions are disbursed loans on priority, so if your institution is not recognized enough, your loan application might get rejected for this reason. Most financial lenders have their list of recognized institutions, you can enquire about this with your financial lender beforehand, to avoid loan rejection.
7. Low Repaying Capacity
Repaying capacity is an important factor in the education loan application process. The financial institution will check the applicant’s repaying capacity so that they are assured to get their loan amount back even if the applicant does not get a job or loses the job. So, the income of the applicant and co-applicant is checked.
Repaying Capacity is also determined by checking the credit history of the applicant and co-applicant. Missed payments and EMIs can ruin the credit record and lower your repaying capacity as well.
8. Approaching the Wrong Financial Institution
This is the most common reason for loan rejection. Approaching the wrong financial institution won’t provide any fruitful results for your loan application. Say for example if you need to take a collateral-free education loan of 50 lakhs INR to fund your overseas education and you approach a nationalized bank for this, your application will definitely get rejected because nationalized banks provide collateral-free loans for up to 7.5 Lakhs INR only. So, you will have to approach a private bank or NBFC for successful loan disbursement.
Now that you are aware of the leading factors that result in an education loan rejection, make sure that you don’t make any of these mistakes. If you are facing any confusion pertaining to your overseas education loans, you can approach our experienced Education Loan Advisors at ÉLAN Overseas Education Loan to get loan application assistance. They will assist you with your entire education loan for abroad studies by the Indian Government Banks
, Private Banks, NBFCs, International Lenders, etc.