Education Loan Eligibility Criteria in India for Students

Income and Repayment Capacity

As opposed to traditional personal loans, education loans are built on the basis of the future earnings of the student as well as the financial stability of his/her family. Nonetheless, prior to making any lending decision, the financial institution evaluates the repayment capability of the individual or his/her family.

The lending institution may consider the income of the co-borrower, his/her occupation, any debts that he/she owes, bank statements, and any other financial obligations.

In cases where there are larger loans, then it is advisable for the financial institution to carry out a comprehensive analysis of the financial standing of the co-applicant. The need for such an analysis becomes crucial in cases where the loan requested by the student is significant as it includes tuition costs and living costs. Both students and parents should determine the amount of money they will require to avoid borrowing extra.

Also read: How to Apply for an Education Loan in India

Credit History of the Co-Applicant

A credit history is yet another aspect that lenders could take into account when assessing an education loan application. The credit history of the co-applicant is especially significant since the co-applicant would be jointly liable for the loan.

A record of punctual repayments of past loans and credit facilities could be proof of good credit behavior. Defaults, overdue payments, and other such negative credit events could have an impact on the lender’s evaluation.

A student must not assume that his/her minimal credit history is going to hinder the ability to get an education loan. A young student does not necessarily have any or little credit history. In such cases, the creditworthiness of the co-applicant plays an integral role in the process. It is always advisable for a student to check the co-applicant’s credit report before submitting the application.

Course and Institution Eligibility

Every educational course is not always eligible to obtain an education loan. The banks have their own criteria as far as the courses and institutions which are eligible for financing are concerned.

The courses which possess academic recognition, professional relevance and career orientation can be financed through education loans.

Institutions can also come into the picture. The selection of the university may be based on certain criteria such as location, accreditation, reputation, course format, etc. for the purpose of studying abroad.

Therefore, students must not get carried away by the thought that just because they have been accepted in the university, a loan would be made available. It is important for the students to confirm the same with the lender in this context.