Education Loan for Abroad Rejected? Top 10 Reasons you must be Aware of
Not only preparing to get in top colleges is a cumbersome task but also funding the course is equally difficult. The fees charged by many of the private institutions are extremely high. But money shouldn’t hamper the aspirants’ dream and therefore many institutions, through tie ups with banks offers educational loans at nominal interest rates for which repayment structure is also different than other loans. Apart from tie ups, banks also provide loans on one to one basis for students wishing to pursue their higher studies.
But in spite of all the precautions taken and preparation made by the student, they may get their loan application rejected due to number of reasons. Here are some of the common reasons of why the bank may reject you education abroad loan application.
Lack of collateral/ security
Many banks do not provide the 100% funding for the MBA courses. Collateral will be required in case the loan requirements exceeds the limit of 8 lakhs. Types of collateral that can be offered include:
- Fixed Deposit
- Life Insurance Cover
- Property (land/ flat/ house/ shop)
- Others (KisanVikasPatra/ NSC, etc.)
But in certain cases, these properties are disputed or do not have clear ownership rights. Also, sometimes the value of collateral is below the amount of loan to be taken. In such instances, bank is liable to reject the request for loan.
Co-Applicant/ Joint Borrower
Co-applicant has a very important role to play in process of application clearance. In case, the co-applicant does not have a good credit score, your application will not be accepted. Co-applicant could be parents, guardian, spouse or parent-in-law. Lenders will verify previous payment history before approving the application.
Recognition of the education institute
In case of institutes which are not well recognized or have poor placement records, there are high chances that your loan applicant will not be approved. Banks will not invest in the loans where there are very less chances of timely repayment.
For the professional courses like management, engineering, medicine from where the return are expected to be high after completion of course, chances are high that your loan application will be approved. There are certain courses like those of arts, where the bank may not approve the loan for.
Most of the banks will require a third party guarantee for loans ranging between 4 lakhs to 8 lakhs. You must be careful of the CIBIL score of the guarantor. In case the applicant fails to repay the loan, the burden fall on the guarantor who is usually the parents of the applicant. Any defaulting payment or delayed payment of previous loan or credit card of the guarantor will surely lead to rejection. Guarantor’s credit worthiness will play one of the most important role in approval of loan. A positive score will ensure quick and easy clearance.
Poor Academic Performance
In case of the student having poor academic record, it is quite likely that their application will not be cleared. You might have studied from a reputed institute but have got admission under the management quota due to poor academic performance, bank will reject you request. In such cases, bank assumes you to be a non-performer and will not consider you fit to pay the EMIs.
Rejection of previous loan application
For the students who’s any of the previous loan application has been rejected or of the guarantor, there is a high probability that your application ends up being rejected again. Make sure to have clean records and rating before you apply for loan.
Incomplete or Fake documents
It is important that the applicants make sure that he/ she has all the necessary documents required for loan approval. In case any of the document is found to be fraudulent/ forged, not only the application will be rejected but also strict legal action will be taken against the applicant. List of documents required will be:
- Proof of admission
- Mark sheet of the highest qualification
- Estimate of expenses and schedule of fee payment at the institute
- Bank statement of last 6 months
- Asset and liabilities statement
- Income tax assessment records (not earlier than 2 years)
- Identity proof
- Residential proof
Type of course
Most of the banks will offer loan for full time courses only. In case you have applied for funding if correspondence/ distance learning/ part time course your application will not be accepted.
There are several other issues which bank may face during the approval process which includes age of the applicant, citizenship and most important is the call letter. Until and unless students receive the call letter for admission, no bank will make the clearance of loan. Some banks have set lower age limit for education loan abroad approval to be 30 years.