Education loan: Higher education cost is increasing day by day. In such a situation, education loan has become necessary for many students today. In such a situation, a question arises that if the parents of a student are loan defaulters, can it make a problem for the student to take education loan? Experts believe that, but with certain conditions and options.
What do you see while giving bank education loan?
When banks evaluate an education loan to a student, they not only see the academic qualification of the student, but also their guarantor i.e. the financial position and credit history of the co-applicant. In most cases, parents are co-applicants.
If the parents’ CIBIL score is bad or they have defaulted on an old loan, the risk for the bank increases. Consequently:
- The application of the loan may be rejected.
- The interest rate may cost higher.
- Additional security or guarantee can be sought.
Parents have a direct impact on becoming guarantors
According to the expert, if the student makes parents a co-applicant and they are defaulters, it becomes difficult to get the bank approval. Especially government banks take credit score seriously. However, some private banks and NBFC (non-banking financial companies) may show flexibility, but their interest rates may be higher.
Can a student get a loan in his own name?
The answer is, yes. However, the loan in the name of the student is found in certain situations. Such as :
- It is his income, that is, someone is doing part-time job.
- A third person, such as a relative or family friend, is ready to be a co-applicant.
- He is enrolling in an institution where the bank has confidence in placement and future earnings. Like IIT, IIM.
What are the options when parents are defaulted?
- Government Schemes: Under schemes like Vidya Lakshmi Portal of the Government of India, many banks provide loans, where the terms of guarantee are relatively simple.
- Scholarship and Grant: Meritorious students are given scholarships by the Government of India, State Governments and Private Institutions.
- Education loan from NBFC: Companies like Avanse, Increde, Auxilo have a slightly flexible attitude. However, their interest rate may be higher.
- College -ported Financing: Some premium institutes provide a loan scheme for their students themselves, where family credit history does not become a hindrance.
Also read: How right to take education loan for studies abroad, what are its advantages and disadvantages?