8 Reasons Why Your Education Loan Can be Rejected
Applying for an education loan can be a crucial step in achieving your academic and career goals, but unfortunately, many applicants face rejection.
Understanding the common reasons for education loan rejection in India can help you improve your chances of approval.
In fact, the first thing to do when faced with an education loan rejection is to find out why your application got rejected in the first place.
Reasons for Education Loan Rejection
Let's delve into the top 10 reasons education loans are often denied in India and provide insights on how to address these issues effectively. By being aware of these pitfalls, you can better prepare and enhance your loan application strategy.
1. Incomplete Documentation
When applying for an education loan, several documents are required and each document will be verified one by one by the bank.
Missing or incorrect documents, such as income proof, admission letters, or identity verification, can lead to rejection. Ensure all required documents are submitted accurately and completely to avoid delays and rejections.
Also, if the bank discovers that the documents have been forged, the education loan will be immediately rejected. Due diligence can help with quicker student loan approvals from the bank.
To not miss out on the documentation, read about Documents Required for Education Loan.
2. Incomplete Loan Application
An incomplete or improperly filled application form can lead to rejection. Double-check that all sections are filled accurately and thoroughly, and that all required information is provided.
3. Poor Academic Performance
When considering an application for a study loan, lenders also take into account academic history. A student who continuously performs well and is admitted to a prestigious institution has a better chance of getting the best education loan in India and vice versa.
On the other hand, a student with ordinary or below average grades may have a lower probability of getting their student loan in India approved. It’s because the chances of finding employment are greatly diminished on account of their poor academic records, ergo raising questions about timely EMI payments.
Approval Based on Your 12th Marks. No Co Applicant Required. Check Your Eligibility.
4. Unsatisfactory Institute Ranking
Loans are often restricted to courses from recognized and accredited institutions. Applications for courses from unapproved or lesser-known institutions can be rejected as they may pose a higher risk.
It is important to ensure the university or college in question is recognised and features under bank-listed institutes. Also, a good placement record will always add to the credibility.
5. Low Course Potential
Lenders assess the job prospects and earning potential related to the course you plan to pursue.
There are higher chances of loan approval if the course in question offers high earning potential such as many science, engineering, medicine, and management courses do. Based on the course or elective, banks can assume a student's future income and provide the educational loan amount.
Courses with limited career opportunities may be deemed less viable, leading to rejection of the loan.
6. Insufficient or Low Credit History
Lenders check the credit history of the applicant or their co-applicant. A limited or poor credit history can be a red flag, indicating a higher risk of default.
Education loans are co-borrowed by students wherein the parent or legal guardian is a co-applicant. When a student loan is under the scanner, the creditworthiness of co-applicants is taken into account.
Building a solid credit history or having a co-applicant with a strong credit profile can improve chances of approval.
Read About What is a Credit Score and How to Increase your CIBIL Score.
7. High Loan Amount Relative to Income
If the requested loan amount is disproportionately high compared to the co-applicants’ or applicant's income, lenders may view it as risky. Usually the total EMI of the applicant, across all loans, must not cross a certain proportion of their earning.
Ensure the loan amount is realistic and aligned with income.
8. Co-Applicant Issues
If the co-applicant (usually a parent or guardian) has a poor credit history, low income, or insufficient documentation, it can impact the approval process. Ensure your co-applicant meets the lender’s requirements and provides accurate information.
Also Read About How to Get an Education Loan without a Co Applicant.
It can be deeply saddening when students don't get the student loans they are seeking and compromise on the institution.
All is not lost. There are alternatives that can help.
Propelld - An Alternative to Traditional Bank-Based Study Loans
Other than banks and NBFCs, there are alternatives like Propelld that have their own underwriting process. Unlike traditional bank-based loans, where credit history holds more merit, Propelld’s process takes into account the student’s academic merit too.
While banks demand tangible collateral security and financial documentation, a loan approval from Propelled requires proof of academic performance along with details of the course they are applying to and at which institute. Once the loan is approved, students can complete their loan application. This includes further verifications and advanced EMI payments if needed.
Benefits of Choosing Collateral-Free Loans with Propelld
There are many advantages to choosing Propelld to apply for an education loan without collateral:
- Customised Loan Products: Propelld customises its loans based on the applicant’s profile.
- A chance to apply for more expensive courses by opting to take a loan from Propelld.
- EMI payments, rather than one-shot payments.
- Propelld has a fully digitised process, which includes the application, approval, disbursal, and collection.
- Loans are sanctioned quickly and there are no-cost EMIs.
- No mortgage is required by Propelld.
A rejection from the bank can be a disappointing experience, especially since it invariably affects the future pursuits of meritorious students. But with alternatives like Propelld that remove the barrier to financial access through private study loans, the real impact of not getting a traditional education loan, is getting a collateral-free loan with competitive student loan interest rates. Apply now.
Learn More about Credit Score and Loans from Propelld
1. Does my credit score get affected when the bank rejects my education loan application?
Yes but also no. Credit and loan applications in the last 30 days typically affect your credit score, but there is no direct correlation between loan rejections and your credit score.
2. Am I eligible for a private loan from Propelld?
Loan approval from Propelld depends on a satisfactory KYC and verification process. Eligibility is based on:
1. Valid Indian citizenship,
2. No default on past loans, and
3. Submission of required documents.
3. Does Propelld offer flexible repayment plans?
Propelld does offer flexible repayment plans. However, flexibility is subject to the applicant’s credibility and the partner institution they are applying to. Propelld loans are close-ended loans. That means, the payment goes directly to the institution and not the borrower.
4. What is the paperwork required to apply for a loan?
The documents needed when applying for a loan are:
- ID proof (Aadhaar, PAN, Driving Licence, Voter ID, Passport)
- PAN
- Bank Statement
- ITR
- Salary Slip
- Marksheet
5. How do I prevent my Propelld loan from getting rejected?
Ensure you submit all the necessary documents along with proof of academic performance (marksheets and certificates of excellence). For more assistance, contact the support team at +91-7375911702 or drop an email at support@propelld.com.
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