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Education Loan Defaults May Hurt Students’ credit score: (CIBIL)
Hello, Friends Today I am going to share some interesting facts on the Education loan defaults may hurt students’ credit score: (CIBIL). The Pointing to the high incidence of the defaults in the low-ticket education loans, the credit information company (CIBIL) on such default history might adversely affect the student’s credit to score and their ability to take out the other loans in the future.
Education Loan Defaults May Hurt Students’ credit score: (CIBIL)
This overall incidence of the delinquency on the education loans is around the 5 per cent, which is going by the dues of 90 days plus. This default rate for the education loans with the ticket sizes below Rs 4 lakh is the significantly higher at the 8.1 per cent compared with the large-ticket size loans. The CIBIL said in a statement that the Comparative default rates for the other categories are: likely to be Rs 4 to 5 lakhs — 4.8 per cent; Rs 5-15 lakh — 2.1 per cent. For loan amounts above the Rs. 15 lakhs, the long-term default rate is under the 1 per cent. The aggregate credit to exposure of the education loans in the Indian banking system is around the Rs. 77,000 crores.
This is also barely 1 per cent of the total banking system to exposure, and by itself may not be present a systemic risk, so the CIBIL said, However, the importance of such defaults can be seen in the two aspects. Firstly, these delinquency trends are predicted the risk profile of the future borrowers who will join the mainstream credit market. Secondly, they may also be the reflective of the potential job opportunities in the industry. Mr. Harshala Chandorkar, the chief operating officer of TransUnion CIBIL, said that the banks needed to focus on the sharpening their risk management capabilities while the assessing small-ticket education loans.
The joint loan or a loan which is guaranteed by a credible guarantor who reduces the delinquency level significantly. As such, the steady underwriting practices will ensure the profitable loan growth in this very important education loan segment.
The Students are availing of the loan opportunity and must understand that it is important to pay back their education loans once they complete their studies. Defaults on the repayments of education loans would reflect in the borrower’s CIBIL Report and they might negatively affect his/her CIBIL Score. This could also hamper the chances of the getting a loan for the many more important milestones in the coming future, the growth rate in the number of the educational loans has shown a flat to the downward trend. Yet, the growth in the amount disbursed is to driven by an increase in the average ticket size from the amount around Rs 3.5 lakh in the years of 2012 to 2013 to Rs 6.5 lakh recently. The CIBIL said that the big-ticket education loans of Rs15 lakh plus has accounted for the close to the 60 per cent of the amount disbursed. The share of the loans below the Rs 4 lakh has fallen to the less than 20 per cent of the total loan which is disbursed in the past two years.
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