Reasons why students loan application may get rejected

Students who’re present credit score customers and have a poor credit score historical past indicated by a low credit score rating will discover it tough to get a loan permitted within the first place.

Normally, when there’s a doubt over the borrower’s compensation capability, lenders may reject the loan. This may stem from low earnings or attempting to take a loan disproportionate to at least one’s earnings, having greater borrowing dangers as a result of different concurrent loans, and never with the ability to present collateral as required by the lender. These causes apply to training loans as properly.

In this piece, we take a better have a look at why lenders can reject a scholar loan.

For students who’re new credit score customers, the lender may think about taking a look at elements different apart from their credit score historical past. Gaurav Aggarwal, director, mentioned, “Lenders consider the applicant’s past academic track record, type of course, future employment prospects, post-placement repayment capacity, type and value of collateral offered, reputation/rating of the concerned educational institution and income and credit profile of parents/guardian who has stepped in as co-borrower or guarantor while evaluating an education loan application. Failure to satisfy the lenders for any of these eligibility criteria can lead to the rejection of loan application.”

Aggarwal additional explains, training loan lenders normally require margin money of 5% within the case of research in India and 15% within the case of research overseas. Most lenders additionally require tangible collateral safety for training loans exceeding Rs7.5 lakh. No assure/collateral required for training loans of as much as Rs4 lakh, whereas third occasion assure may be required for training loans ranging between Rs4 lakh and Rs7.5 lakh. “Hence, those planning to avail education loans must arrange the required margin money, collateral securities or guarantor before submitting their education loan application,” he mentioned.

Similarly, the ranking of the academic establishments and programs provided may differ broadly throughout the lenders. Credit threat evaluation of the loan applicant primarily based on his credit score profile and/or his co-applicants/guarantors, too, can differ broadly relying on the lenders. The distinction within the credit score threat evaluation processes adopted by numerous lenders can result in a variation within the probabilities of an training loan’s approval or rejection.

Adhil Shetty, chief govt officer,, mentioned, “Beyond the creditworthiness of the applicant, the loan might be rejected for technical causes as properly. For instance, there are issues or errors within the application or the academic institute for which the loan is being sought doesn’t have the required accreditation to UGC or AICTE, or the course isn’t eligible for financing below a lender’s phrases and situations.”

Thus, students should test the eligibility standards for taking a loan earlier than making use of for it.

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