As per a report by a central government department, there had been a 96% rise in the annual cost of professional and technical education like MBA and engineering between 2008 and 2014.
This clearly displays the exponentially rising cost of higher education in India, especially at reputed private institutions. As a responsible parent, while you may have already saved and invested for your child’s higher education, you may fall short of funds.
Rather than depleting your savings or using funds earmarked for retirement, you can opt for a higher education loan to cover all aspects of your child’s collegiate studies.
Just like other unsecured personal loans, a higher education loan also requires you to meet a lender’s eligibility criteria. One of the foremost criteria is your CIBIL score.
This score helps lenders measure your creditworthiness and ability to repay the loan. To guarantee a hassle-free application process and quick approval, it is necessary to ensure that you maintain a good CIBIL score.
Read on to know more about the CIBIL score required for a personal loan and the relationship between your CIBIL score and a higher education loan.
What is a CIBIL score?
Your CIBIL score is a three-digit score that TransUnion CIBIL, a credit information company, maintains based on your credit behaviour and history. CIBIL receives your financial information, including your credit card usage, loans, and income, from banks and institutions on a monthly basis.
Based on this information, it creates a credit report and computes a CIBIL score between 300 and 900. While a lower score means you pose a credit risk, a high score means you are a responsible borrower. For instance, if you have missed EMIs or defaulted on your debt repayment, your score decreases.
Every time you apply for a loan, lenders approach CIBIL to access your credit report and check your CIBIL score. A high CIBIL score increases your chances of getting approval for loans.
This also means you can get financing of a higher amount or at more competitive interest rates. On the other hand, a low CIBIL score reduces your chances of getting a loan.
However, certain lenders may approve your loan application even with a low CIBIL score, but this may be for a lower loan amount or come with higher interest rates.
How does CIBIL score affect your eligibility for a higher education loan?
Since a higher education loan is a personal loan customised for education, it does not require you to pledge any collateral as security. In this case, a lender cannot rely on an asset in case you default during repayment. So, your CIBIL score becomes even more important when a lender assesses you as a potential borrower.
With a high CIBIL score, you can get a higher education loan quickly and easily. You can also get this loan on pocket-friendly terms, with attractive personal loan interest rates. If your CIBIL score is low, the reverse is true.
What is the CIBIL score required for a personal loan?
Usually, lenders consider a CIBIL score of 750 and above a good score for a personal loan. Here is a snapshot of CIBIL score ranges and what they indicate to lenders.
- 300-549: Poor score; reflects the high credit risk
- 550-649: Low score; reflects some credit risk
- 650-749: Average score; will get you credit card and loan offers, but without negotiating power
- 750-900: Good to high score; reflects high creditworthiness and offers negotiating power to borrowers
What to do if you have a low CIBIL score?
Your credit history and repayment behaviour critically impact your CIBIL score. To improve your CIBIL score, make your monthly payments on time. Consolidate your debts, if possible and do not default on your loan.
Additionally, do not approach multiple lenders for a loan and be mindful of keeping your credit utilisation ratio low.
Once you have the CIBIL score required for personal loan applications, opt for a higher education loan from a leading financial institution like Bajaj Finserv. You can access funds up to Rs.25 lakh via this personal loan for education on a flexible repayment tenure up to 60 months.
With its simple eligibility criteria and minimum documentation, this loan offers hassle-free financing. You can also benefit from the Flexi Loan facility, by which you get to reduce your EMIs by up to 45% and tackle education costs as and when they are due by making multiple withdrawals from your loan account.
Do not forget to check your pre-approved offer from Bajaj Finserv to enjoy instant approval on a deal that is tailored for you!