Introduction
For most Indian students applying for an abroad education loan, having a co-applicant—usually a parent or guardian—is mandatory. While income and job stability matter, one factor that often decides whether your overseas education loan gets approved (and at what interest rate) is the credit score of your co-applicant.
In this blog, we’ll break down how the co-applicant’s credit score impacts loan approval chances, interest rates, and repayment terms, and what students can do to improve their chances.
Why Do Lenders Need a Co-Applicant?
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Since students usually don’t have a steady income, banks and NBFCs rely on the co-applicant’s financial credibility.
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A co-applicant guarantees repayment if the student is unable to pay.
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Lenders check the co-applicant’s income proof, repayment history, and credit score before sanctioning the loan.
What is a Good Credit Score for Loan Approval?
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Credit scores in India generally range from 300–900 (CIBIL score).
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A score of 750 and above is considered excellent.
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650–749 is acceptable but may lead to stricter terms.
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Below 650 can lead to rejection or higher interest rates.
How Credit Score of a Co-applicant Impacts Loan Approval
1. Loan Approval Chances
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High score (750+): Smooth approval with flexible terms.
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Moderate score (650–749): Approval possible but with conditions.
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Low score (<650): High risk of rejection.
2. Interest Rates
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A strong credit score helps secure lower interest rates.
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A weaker score means higher risk for the lender, leading to increased interest.
3. Loan Amount Sanctioned
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With a high score, lenders are more confident and may sanction larger loan amounts.
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With a low score, they might sanction a reduced amount or demand collateral.
4. Processing Speed
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Good credit reduces additional verification, making approvals faster.
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Poor credit may lead to lengthy background checks.
Tips to Improve Loan Chances if Co-applicant Has a Low Credit Score
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Add a stronger co-applicant (if possible, such as another parent or working sibling).
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Choose collateral-based loans – property or fixed deposits can offset poor credit scores.
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Improve the score before applying by repaying outstanding debts and avoiding defaults.
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Consider NBFCs or international lenders, as some place less emphasis on credit score.
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Apply for smaller amounts first, then request a top-up later once repayment starts.
Real-Life Example
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Student A applies for a loan of ₹30 lakhs with their father as co-applicant. Father’s CIBIL score is 780. Result: Loan approved quickly, interest rate ~9.5%.
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Student B applies with a co-applicant whose score is 620. Result: Loan sanctioned only for ₹15 lakhs, higher interest ~12%, and mandatory collateral.
Conclusion
The co-applicant’s credit score plays a decisive role in abroad education loan approvals. It affects not just whether you’ll get the loan, but also the amount, interest rate, and repayment flexibility. Students should carefully evaluate their co-applicant’s credit history before applying and, if needed, explore alternative options like collateral-based loans or fintech lenders.
