The Kerala High Court has ruled that a student’s application for an education loan cannot be rejected based solely on their low CIBIL score. Justice P.V. Kunhikrishnan emphasised that banks adopt a compassionate approach when evaluating education loan applications. Furthermore, he suggested banks must recognise that students play a crucial role in building the nation’s future.
According to the court, it is unjust to reject an education loan application solely because of a low CIBIL score. The bank should have accepted the student’s application based on their credit history.
While giving this judgement, the Kerala HC considered a previous court ruling. It referred to the ruling which stated that the CIBIL score of a student’s parents should not be a reason to reject a student loan. Instead, the student’s repayment capacity should be the decisive factor after completing their education.
This ruling highlights the importance of considering other factors. These factors include the student’s potential for future earnings and their ability to repay student loans after completing their education. This judgement aims to provide equal opportunities for students who may have a low credit score but possess the potential to succeed and fulfil their loan obligations in the future.
CIBIL Score and Education Loan
The CIBIL score, or Credit Information Bureau (India) Limited score, is a numerical representation of an individual’s creditworthiness. It is a measure of their credit history and helps lenders assess the risk associated with granting them a loan or credit. The higher the CIBIL score, the more likely a student is to be approved for education loans and offered favourable terms.
When it comes to education loans, the CIBIL score is often taken into consideration by banks and financial institutions. A good credit score can increase the chances of approval. Additionally, it can potentially result in more favourable loan terms, such as lower interest rates.
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