In this modern competitive world, everyone deserves the best quality education as it is the most rewarding investment you can make. However, with increasing education costs in India and abroad, education has also started carrying a premium price tag.
Education loans come in handy to help students overcome their financial barriers and fulfill their dream of pursuing the desired higher education. Nevertheless, getting an education loan with a low credit score can get pretty challenging. Do you also face the same situation? Well, you must not lose hope as there are some ways through which you can get an education loan with low credit.
Here are some tips to get an education loan even if you have a low credit score:
Tips to get an education loan with a low credit score
When speaking of an unsecured education loan, the credit score is one of the most important factors to consider, besides your income, for loan lenders to measure your creditworthiness. Therefore, if have a lower credit score, odds are you might not get approved, or worse that you will get the education loan at a higher interest rate. However, there is no need to get disheartened as here are some of the easy and doable tips to get an education loan with a low credit score.
- Pay your dues on time
Your credit score strengthens on repaying all your debts on time and in full. Your credit score is a 3-digit number that shows your creditworthiness to the lender. This number is calculated considering your debt repayment history amongst other factors. The more you’re consistent and timely with your debt repayments, the higher your credit score gets. A higher credit score is your best bet to avail of an education loan at the best interest rates and favorable loan terms.
- Disclose Income to Prove Loan Repayment Capacity
Apart from your credit score, your lenders look at your income while evaluating your loan application. Even if you have a lower credit score, if your income is high, it strengthens your loan application because of your higher repayment capacity. Since an education loan is an unsecured loan, lenders usually approve the loan applications of applicants with higher incomes. While applying for an education loan, ensure that you reveal your income from all sources like rent, dividends, interest on fixed deposits, etc.
Resolve Credit Report Errors
If you have a credit card, it may happen that you may experience identity theft or fraud on your card. Also, additionally, your credit report may have certain errors that may bring down your credit score. While or before applying for an education loan, check your credit profile for any errors and get them resolved in time to bring up your credit score.
Factors Affecting your Credit Score
Below is a list of factors that impact your credit score.
- The Applicant’s loan repayment history –
The credit score is usually a reflection of how quickly a person repays their debts, apart from other credit score determinants. Also, any default in your loan repayment or credit card payment will adversely impact your credit score.
- Credit use limit –
Using credit more than your credit limitation adversely impacts your credit score and mirrors poor spending practices.
- The extent of your credit use –
In easy terms, it indicates the total number of years your credit account has remained open. In addition, positive credit history will assist the lender in making a quicker judgment on the loan application.
- Only paying the minimum amount due –
Odds of falling into a debt trap boost exponentially if you only pay the minimum sum due per month. Your interest sum will keep multiplying on the remaining sum, and it indicates poorly on your credit score.
- Credit Mix –
It is crucial to maintain a healthy mix of unsecured and secured credit as it is looked at by banks and financial institutions positively as it indicates that you own expertise in handling both kinds of credit. Likewise, having just one type of credit can impact your credit score adversely.
In a nutshell, a high credit score is crucial for obtaining an education loan and unlocking the door to your higher education in a reputed educational institute. Also, if you have a low credit score and want an instant loan without documents, EarlySalary can be your perfect partner. EarlySalary is a one-stop destination for all your instant cash requirements and helps you fulfill all your higher-education dreams.
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