Education loan: When it comes to obtaining an education loan from a bank, having a good CIBIL score holds significant importance. Unfortunately, students often face difficulties securing education loans due to unfavorable CIBIL scores. Shedding light on this issue, the Kerala High Court recently made a noteworthy comment. Justice PV Kunhikrishnan reprimanded the banks, emphasizing that education loans should not be denied solely based on low CIBIL scores. Instead, he urged the banks to adopt a compassionate approach when evaluating applications for education loans.
According to a report by LiveLaw, the Kerala High Court addressed a Public Interest Litigation (PIL) filed in this regard. The court highlighted the fact that students play a vital role in building the nation. Rejecting a student's education loan application solely on the grounds of a low CIBIL score is an unfair practice. Banks need to consider the human aspect involved in these cases.
What led to this legal intervention?
Notably, the petitioner student had two outstanding loans, with one loan amounting to Rs 16,667 in overdue payments. As a result, the bank classified the student's loan account as overdue, negatively impacting their CIBIL score. Consequently, when the student applied for an education loan, their low CIBIL score hindered the loan approval process. Faced with this predicament, the student petitioned the High Court, urgently seeking approval for the loan to avoid potential hardships. In response, the Kerala High Court emphasized that banks should assess the student's repayment capacity rather than relying solely on the CIBIL score when granting education loans.
The importance of maintaining a favorable CIBIL score:
Throughout life, there arise numerous occasions where acquiring loans becomes necessary; be it for education, homes, cars, and more. Banks evaluate an individual's CIBIL score before approving such loans. An incorrect or low CIBIL score can create obstacles in obtaining loans, often resulting in higher interest rates for customers. To ensure a favorable CIBIL score, it is essential to diligently make timely payments for loans and credit card bills. Additionally, it is advisable to avoid becoming a guarantor for someone else's loan, as their failure to repay the loan promptly can adversely affect your own CIBIL score.
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