Eligibility Criteria For an Education Loan Co applicant: Know the Complete Details
Co-applicants or co-signers play a very important role in any loan process. This is especially true in the case of an education loan co applicant. An Education loan co applicant that does not meet the relevant eligibility criteria is one of the major reasons why a lot of loan applicants face a hard time trying to get an education loan from prominent lenders in India. This article discusses some of the basic requirements which have to be fulfilled by any particular co applicant for education loan.
In the education loan process, the eligibility criteria for a co applicant for education loan are more stringent as compared to those set for loan applicants. The education loan co applicant requirements which are going to be discussed in this article will cover both types of education loans; secured education loans as well as unsecured education loans. Before we move into the details, here is a glimpse of the different individuals preferred by lenders for an education loan co applicant.
Who is a Co-applicant? What Role Do Co applicants Play in The Education Loan Process?
A co applicant essentially refers to individuals with stable financial profiles who co-sign the education loan agreement along with the loan applicant at the time of borrowing one. A co applicant is the only person to whom the banks may turn to if the loan applicant (student) fails to repay the education loan within the scheduled time period. Different lenders refer to co applicants using different terminologies.
A co applicant or a co-borrower or a co-signer, all refer to the same person. So, when your lender mentions any of these terms, you need to know that they all point to the same individual.
Who Can Be An Education Loan Co applicant?
Most lenders prefer either one of the parents to be named as co applicant for education loan. Students may name either one of the earning members as education loan co applicant. There can only be one education loan co applicant. The education loan co applicant requirements of the two different types of lenders are also different. However, both types of lenders mainly focus on the income profile of individuals who are to be named as co-applicants for education loans.
Types of Co-applicants in Education Loans
It is common knowledge that in India, education loans are mainly divided into two different categories based on the need for collateral. Similar to the nature of these education loans, the eligibility criteria set by lenders of these different types of education loans are also different. Especially in the case of secured education loans from government banks.
Read More about Types of collateral for SBI education loan
Education Loan Co-applicant Eligibility Criteria For Secured Education Loans
Since secured education loans involve collateral in the form of different types of assets, the co-applicant eligibility criteria set by government banks for such education loans are slightly flexible. Under certain circumstances, government banks allow students to name two different kinds of education loan co applicants.
Primary Co-applicant: Students who apply for secured education loans from government banks can name their parents as co-applicants despite their financial profile.
Simply put, students can name individuals who are retired professionals, farmers and those who do not have a stable income, as a primary co-applicant for education loan in government banks.
Financial co-applicant: A financial co-applicant is required in the secured education loan process only if students are unable to name individuals having a permanent income as their primary co-applicants. The financial co-applicant can be anyone who is related to the loan applicants by blood. First cousins, own siblings, paternal uncle or aunt and maternal uncle or aunt are some of the preferred choices for financial co-applicants. These individuals need to have a stable income source and must possess all the relevant documents which reflect the same. Students are also allowed to name a third-party as their financial co-applicant, just in case if they do not have any relatives. This provision is also applicable to students whose parents are not alive.
One of the biggest reasons why students tend to explore the education loan schemes of international lenders is that they do not require an education loan co applicant, as opposed to the policies of Indian lenders. However, were you aware that there are certain Indian lenders who allow students to apply without the need of a co-applicant for education loan under certain circumstances?
Let us explore the different scenarios under which students are not required to mandatorily name an education loan co-applicant.
Education Loan Without Co-applicants: When is it Possible?
There are two major situations in which students are not required to name an education loan co applicant. The first situation is possible only in the case of secured education loans which are available only from government banks. The second situation is applicable only to abroad education loans borrowed from certain banks/financial institutions. Here is a detailed explanation of how it is possible to borrow an education loan without naming education loan co applicants.
Situation 1: Government Bank Education Loans
It is very important to note that one of the biggest benefits of borrowing government bank education loans to fund your higher education abroad is that most of these banks allow individuals who do not have a stable income source or the relevant income proof-related documents, as education loan applicants. Are you wondering about whether this is true?
It is a fact that under the regulations set by the RBI for abroad education loans, only the future earning potential of a student is to be considered for abroad education loans. This clause puts the income profile of their co-applicants on the back-burner. If worse comes to worst, such education loan co applicants will be asked to submit an income certificate which can be made available within a short span of time and presented to these banks.
Another factor that can be taken into consideration is that since secured education loans involve the pledging of valuable assets as collateral, most government banks provide certain relaxations to students when it comes to the eligibility criteria set by them for education loan co applicants.
For example, the income profile of an education loan co applicant is one of the most crucial criteria which all applicants are required to abide by. However, in the case of secured education loans, government banks sometimes allow individuals having weak financial records to be named as education loan co applicants due to the above-mentioned RBI regulations. However,
Individuals whose CIBIL scores are low due to their bad loan histories will not be accepted as education loan co-applicants under any circumstances by both, government banks, as well as NBFCs.
Government banks do accept education loan co-applicants whose CIBIL scores have reduced due to legitimate and pardonable reasons.
Situation 2: Applicants Having Work Experience & Going to Prestigious Universities Abroad
Certain private banks allow individuals who have had work experience of more than three years and have enrolled for an in-demand course at a prestigious university abroad to apply for unsecured education loans without a co-applicant. This provision is generally not applicable to students who apply for an education loan without collateral to fund their undergraduate and postgraduate courses abroad. It is only applicable to those who meet the requirement of having the relevant work experience at the time of applying for the education loan.
This is quite an unknown fact even for bank officials. So if you happen to inquire personally with the concerned banks, you can rest be assured of only getting half-baked information.
In order to know more about how this provision works, do get in touch with the financial team of WeMakeScholars. They can help you understand whether you are eligible for an education loan or not, in a clear and transparent manner. Moving on, let us take a good look at some of the most important education loan co applicant requirements set by different lenders.
Important Parameters Of the Education Loan Co applicant Eligibility Critieria
If you have done your fair share of research on education loans, you may have across several different terms related to the eligibility criteria for education loan co applicants. The education loan co applicant requirements stated by different kinds of lenders differ in a lot of ways. However, the following terms form the basis of the education loan co applicant requirements of all types of lenders, regardless of the kind of education loans given by them.
Term 1: CIBIL Score
A CIBIL score refers to the benchmark credit score allotted to individuals based on their previous financial activities. An individual’s CIBIL score is taken into consideration by all lenders before processing education loan applications. The nominal CIBIL score that all individuals who are most likely to be named as education loan co applicants are required to maintain in order to be considered eligible is 600. Ideally, it will be even better if their CIBIL scores are 685 and above. If your co-applicants’ CIBIL score had gone down because of reasons such as a loan write off, a loan settlement, etc., lenders will strictly not allow them to be education loan co applicants. A low CIBIL score is considered to be one of the pointers of a bad education loan co applicant profile.
If the reason behind the decrease of your co applicant’s CIBIL score is none of the above-mentioned ones, then applying through WeMakeScholars will greatly help you in getting your sanction well within the right time.
Read more about How does CIBIL score affect your education loan?
Term 2: IT Returns Documents
ITR documents are one of the most important requirements of the education loan process. All lender, NBFCs in particular, are very strict about education loan co applicants submitting their ITR documents in order to get an education loan without collateral. Government banks still accept co-applicants who do not possess all the two years’ ITR documents. However, it is extremely difficult to get an unsecured education loan without the relevant ITR documents in place. The WeMakeScholars team is well-experienced with even the smallest education loan co applicant requirements and hence will be able to guide and assist you in the end to end process of securing abroad education loans despite your status.
Term 3: Income Proof/Business Proof
The income proof to be submitted by co-applicants who are salaried are limited only to their salary slips or bank account statements of the previous six months reflecting the timely salary transactions.
However, co-applicants who are self-employed often have troubles submitting legitimate income proofs. This is especially applicable to education loan co applicants who run small-scale businesses.
Co-applicants running a small-scale business, for example, selling sarees from their own homes and have not registered their business, can provide photographs of the stock being sold by them, proving the same, to the lending banks as proof of income.
Other than that, the following documents can be submitted as income proof, apart from the ones mentioned in the above paragraph.
- GST registration proof
- Vendor bills
Education loan co-applicants who run well-established businesses are required to submit the following documents in order to get education loans.
- Profit/Loss statements of their business
- Financial statements of their business accounts of the past six months.
Term 4: Income Amount
The yearly salary of education loan co applicants is also taken into consideration while processing unsecured education loan applications. Individuals earning at least INR 30,000 per month are considered eligible to be named as education loan co applicants. Lenders do consider individuals who earn lesser monthly salaries as education loan co applicants. However, INR 30,000 is the recommended minimum monthly salary. Since most NBFCs lend non-collateral education loans on the basis of the quality of the education loan co applicant profile, fulfilling this requirement is very essential to the process.
A lot of students are unaware of the important aspects of an education loan when they begin the process. Such students are very easily misguided about various education loan terms by lenders when they try to apply directly. One of the major reasons behind this phenomenon is that these bank officials are themselves not aware of the exact provisions laid out by their respective organizations with regards to abroad education loans.
This is why students who apply for their abroad education loans through WeMakeScholars are at an advantage and get their education loans sanctioned way earlier and in a hassle-free way as compared to the others. The financial team of WeMakeScholars consists of professionals who have had the experience of handling even the most complicated education loan applications for the past four years. The expertise and knowledge gained from this experience are what students get to avail when they register with us for their abroad education loan process. So, if you are looking for the right kind of guidance and assistance for your abroad education loan process, do get in touch with them.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s at free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others