What are the Reasons for Rejection of an Education Loan?


  • Why is my education loan rejected?
  • There could be several reasons for it, read this post and know what it could be!

It’s a dream come true for many when they complete their higher studies in the institute they want. But it all gets shattered for those whose education loan gets rejected by the lender because of discrepancies in their application. There can be many reasons for which the loan application gets rejected. Read this post to know about them in detail.

Impact of Academic Performance

Your academic performance is yet another parameter that is considered by banks or NBFC while approving your education loan. A student who has consistently performed well in the past and secure admission to a premier institute has more chances of getting an education loan. On the contrary, a student with an average or below average marks who secured admission under the management quota might have a lesser chance for the loan approval. It is because such students have a much reduced scope of getting employed due to their poor academic performance. This causes concerns over the timely payment of the loan dues.

Admission to an Unknown University

Banks and NBFCs often reject such education loan applicants who seek admission in unrecognized educational institutes with no placement record. So you must have applied to the recognised university and colleges that come under the bank listed institutes because it makes your loan application successful in providing the loan amount.

Educational Course You Pursue

Your loan application is accepted by the bank or NBFC if the course offers a high earning potential like engineering, management, medicine, etc. Based on that, the lender assumes the student’s future income and provides the loan amount. You need to remember that the lender won’t provide you a loan for part-time courses.

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Incomplete Information

A bunch of documentation is involved when you apply for an education loan and each document is verified by the lender. So, you need to make sure that all the documents are submitted properly with the attached loan application form. Because once the documents are submitted you can’t change them. Or if the lender finds that the documents are fake, your education loan is rejected at the very moment. Make sure you won’t make any mistakes like this. Carrying out such due diligence can help get a quick loan approval from the lender.

Type of Education Loan

A secured education loan is approved quickly compared to an unsecured education loan. As there is a surety to the lender that the student will pay on time to save his collateral, and if he doesn’t do that, the pledged collateral can be seized by the lender. Because, to borrow an unsecured loan, the lender may require a high credit score with good academic results which is hard to meet by every applicant. But it doesn’t mean that a secured education loan won’t get rejected. Your loan gets rejected if you provide the wrong collateral such as agricultural land which isn’t acceptable by the lender for an education loan. The bank will accept house, fixed deposit, insurance, or any tangible collateral which is on the borrower’s name. If the property is co-owned then you need to provide the co-owners’ consent for the loan.

Lack of Admission Letter

You need to provide the soft copy of your admission letter which you get from the college or educational institute because it is the only proof by which the lender will know that your admission is confirmed.

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Low Credit Score of the Co-applicant

An education loan is co-borrowed by the student where his parent or legal guardian is a co-applicant. And the credit record of the co-applicant is taken into account to sanction the education loan. If the credit score of the parent is below the expected score of 750, the loan might be rejected.

So, do tell your co-applicant to check his/her credit score before applying for an education loan. If it is not up to the mark, the loan application could be rejected. And if there is a 3rd party guarantor then check his/her credit score as well because a low score could lead to rejection. So, you should choose the right co-applicant or guarantor who would have the credit score as

Make sure you keep these factors in mind while you apply for an education loan. Doing this will help get a quick sanction of the loan.

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