Student loans for study abroad have emerged as strong financial tools for students wishing to study abroad. However, there have been many instances where banks have rejected loan applications for study abroad. According to the Indian Banking Association, loans under the education category faced a record 9% of non-performing assets (NPAs) in 2018. These numbers speak for themselves and have made banks cautious about lending for education, leading to the implementation of strict vigilance in the education loan abroad process.
There are multiple factors considered by a bank when rejecting an education loan application. A few of these applications are listed below:
The past academic performance of the student is an important parameter in the acceptance or rejection of a loan application, whether it is a secured or unsecured loan. Students with excellent academic records who have secured seats at premier institutes in foreign countries have a higher chance of loan approval. Academic records play a crucial role in the rejection of foreign education loan applications. Students with technical backgrounds or those pursuing management and technical education can expect a positive response from lenders when applying for an education loan abroad.
The CIBIL score of the applicant and their co-applicant holds significant value in the consideration of a loan application by the bank. Low CIBIL scores for the co-applicant or a history of default payments have a negative impact on the loan application. Banks consider the CIBIL score to assess the applicant's capability to repay the loan. A CIBIL score less than 600 is considered poor, and such a score may lead to loan rejection by the bank as it reflects negatively on the applicant's creditworthiness. The bank may reject the education loan application to avoid potential future defaults based on the applicant's risky financial profile.
The choice of university for higher education also plays a crucial role in loan applications. Banks are more likely to approve loan applications from students who have secured admission to top colleges or universities. On the other hand, universities or colleges that are unrecognised or have poor placement records are generally rejected by banks for education loan approval abroad.
Banks prefer to approve student loans for courses that have the potential for high-paying jobs in the future. Management, technical, and medical courses have the highest rate of loan approval, as students in these courses are assumed to have high earning potential, reducing the bank's risk of non-repayment. STEM and medical courses that align with professional careers receive positive responses from banks. It is important to note that students enrolled in correspondence courses, vocational courses, or part-time courses are not eligible for loan funding.
Complete documentation is an essential part of the loan application process. Providing false or incomplete documentation will result in loan cancellation by the bank. Students must be extremely vigilant and aware of the documents required by the bank. Each document submitted is properly verified, and any errors, no matter how small, can lead to loan rejection. Submitting correct and relevant documents increases the chances of loan approval, while submitting fake documents will result in loan rejection. Banks have a strict process for document verification, making it an important factor in loan application rejections if not submitted correctly.
It is essential for students to be aware of these reasons for loan rejection and take the necessary steps to address them to increase their chances of loan approval.
Having a co-applicant is a required condition for a student loan for study abroad, and applicants without a financial co-applicant face difficulties in loan approval. Having a co-applicant benefits your loan application, especially if you are applying for an unsecured loan. Banks often reject loan applications from students who don't have any co-applicants.
Before applying for the loan, the applicant must have the admissions or offer letter from the university they have applied to. During the pre-application phase, the bank asks the applicant to provide the offer letter from the university, which initiates the loan application process. Students without a university offer letter may be denied a loan by the bank, as the offer letter confirms that the student has secured a seat.
The applicant must submit the Income Tax Return (ITR) document, which is essential. Banks usually require the co-applicant to submit the ITR filed in the last three years. Only parents can be co-applicants, and presenting the previously filed ITR is necessary to show income proof to the bank. Students who fail to fulfil this condition may not be considered for a loan by the bank.
Collateral-based foreign education loans are easier to obtain compared to unsecured loans. Unsecured loans are more difficult to get approved by banks, especially for higher loan amounts, which can lead to rejection. Unsecured loans without any security will be approved only if the applicant meets certain criteria, such as having a good CIBIL score, a financially capable co-applicant, admission to a reputable university, a satisfactory academic profile, and proper documentation. Failure to meet any of these conditions may result in a loan rejection by the bank.
We are familiar with the reasons behind loan application rejections and work closely with lenders like Avanse, Auxilo, and SBI financial institutions that handle education loan abroad cases. Collateral-based loan applications are often rejected when the collateral documents provided are improper or false. In order to help Indian students pursue higher education opportunities abroad rather than in their country of origin, Education Loan Guru acts as a connecting link between students and financial institutions. By reaching out to the Education Loan Guru, it is possible to correct these mistakes even before applying for an education loan abroad. With timely correction and consideration of the above-mentioned factors, applicants can improve their loan profile.
By Education Loan Guru
