Many young aspirants often choose to finance their higher education by opting for an education loan as it unlocks multiple benefits. With a student loan, you can build a healthy credit score and earn a self-made badge! However, students must remember that an education loan is their first debt, so responsibly repaying it is extremely important. Hence, you need to plan carefully before commencing the education loan process. This article is for you if you have questions, such as what parameters can impact the loan application.

What to know before applying for student loans?

Once you apply for the education loan, your lender will evaluate your application based on certain parameters as a part of the education loan process. This is an essential step as it assists the education loan provider to determine the student’s repayment capacity.

A student’s repayment capacity depends on the employability potential of the student. Therefore, financial institutions will assess the student profile to ascertain their future prospects. Here are some parameters that will be considered when you apply for a student loan.

Student’s academic performance

·         Past academic scores

The lender will take into consideration your previous academic qualifications. For instance, if you are applying for a master’s degree, the lender will require your marksheets for the bachelor’s course. So, you will be asked to submit all your academic transcripts, which will include marksheets for:

o    Academic qualification

o    Certification courses

o    Upskilling programs (if any) 

·       Continuity in education

Students sometimes take a break to research academic paths and pursue competitive exams and internships. If your academic journey has no gaps in between, you will certainly earn some brownie points for it.

 

·         Entrance exam scores

To pursue higher education, students have to appear for competitive entrance exams. The university evaluates the scores during the admission process, and these scores play a crucial role when applying for loans for students.

Some entrance exams:

o    English proficiency tests: IELTS/TOEFL

o    Other entrance exams: GMAT/CAT/SAT/GRE

Course and educational institute

·         Perfect alignment

If you select courses that value add to your previous academic qualifications, it will work in your favour. For instance, if a student has completed a B.tech and applying for M.tech, the course selection is in line with existing skills. On the other hand, if a student with a Bachelor of Arts degree applies for a student loan to pursue MS in computer science, it can be a cause of concern.

·         University ranking

Planning to pursue courses from a well-ranked university or other educational institution will make your education loan journey smoother. Completing your higher education from reputed institutes will give you the edge to build a promising career, leading to faster repayment of your study loan.

·         Future prospects

Your preferred course and the university will play an active role in providing you with a perfect head start. Some universities even offer internship opportunities post-completion of the course. These elements will be considered when you opt for an education loan.

Co-borrower’s financial background

·         Co-signer or co-applicant could be a parent, legal guardian, sibling or other blood relatives. In case a student, for any reason, finds it challenging to repay the loan, the co-applicant will be responsible for the repayment of the student loans. Hence, most financiers will consider the co-borrower’s credit score too.

Collateral

Depending on your preference, you can either opt for a secured (with collateral) or unsecured (without collateral) student loan. If you opt for a secured loan, the quality of collateral will be considered by your provider.

As a student-centric organisation, at Avanse Financial Services, we prioritise students’ employability potential over the co-borrower’s financial background. Co-applicant’s financial details will be checked as a part of the process.

Based on these abovementioned parameters, the financial institutions will generate your Employability Score. If you meet the prescribed criteria of your financial institution, your loan will be sanctioned. Hence, it is important to consider these aspects when you opt when opting for student loans. Apart from these parameters, you must research student loan interest rates, customer service, additional benefits, and costs involved before applying for study loans. If you want more information about education loans, please get in touch with us. We will be glad to guide you!