Education loan can mess up your credit score, repay that education loan NOW

Paying your education loan installments on time, each month, is the best thing that you could do to maintain a good CIBIL (credit) Score.

Student Loans Becoming Necessary Evils

Student loans are becoming a necessary evil these days, in order to get an education that leads to a well-paying job.

When it comes to getting a college education most people can agree that the costs can be staggering at best. Even the least expensive colleges in the nation can add up over a four or five year period of time creating crippling debt for those who do not qualify for some of the better grant programs of substantial scholarships.

The problem lies in the fact that the parents of most traditional college students make too much money to qualify for the free financial aid that is needs based and very few qualify for the limited number of scholarships that are available to students based on merit. Even among those that qualify competition and fierce and there are no guarantees. Enter the student loan. There are all kinds of student loans and unfortunately with rising costs associated with college attendence and the growing necessity of a college degree for success in this country it is becoming more and more difficult to pay the price that is associated with higher education.

Student loans for many can be the difference in attending college and getting the desired education and not being able to pay the high costs that go along with higher education. For this reason you should treat them with respect and not take them lightly.

Why you must repay education loan

Like any other loan, an education loan is also a credit facility and it should be repaid once you complete your course and gain employment. Like any other loans and credit cards, education loans are also reported to the CIBIL and get reflected in the borrower’s CIBIL report. If your score reflects badly, it could hurt your chances of getting other loans, including home loans, even if you have a good job and a good salary.

So, if you ever had taken a loan to fund your education, its very important that you repay it, like any other loan, to maintain a good CIBIL Transunion Score.

Also in more developed economies, an individual’s CIBIL Report and CIBIL Transunion Score is a critical reputational collateral and is used for multiple purposes by various institutions. Employers review it before recruiting a new employee; landlords require it before renting out an accommodation and of course telecom providers check an applicant’s credit history before assigning limits.

One of the reasons being, most Banks are uncomfortable giving out loans to students as it becomes difficult to track their location few years down the line.

There are cases where the students who avail loans, disappear from the radar of the bank, making it difficult for them to track them and get repayments. No wonder then that the banks are not so keen to offer you loans for higher education.

Another reason for their reluctance is because the economy (in general) is not doing great, which means students will find it difficult to get jobs, which increases the probability of them defaulting on their loans.

Unless you are opting for courses such as management, engineering or medicine, you’ll likely be asked for lots of references and/or collateral.

Duly paying your education loan installments on time, each month, is the best thing that could be done to maintain a good CIBIL TransUnion Score. Nevertheless, if you find it difficult to re-pay your education loans, consider an option of negotiation . Banks are open to negotiation. Request the banker to increase your loan repayment term and settle for a lower EMI. This may help reduce your loan burden significantly.

It is never too early to start thinking about your financial future. All these tips will pay off, and definitely help you avoid hurting your CIBIL TransUnion Score and CIBIL Report and thus safeguarding your dreams.