Many individuals struggle to maintain a high CIBIL score in order to secure loans at lower interest rates. However, a recent High Court ruling has provided much-needed relief by declaring that banks cannot refuse to grant loans solely based on a low CIBIL score. The ruling states that financial institutions cannot reject a loan application using the CIBIL score as an excuse, meaning even applicants with poor credit scores will still have access to loans.
Kerala High Court’s Decision on Education Loans
The Kerala High Court has taken a significant step in making education loans more accessible for students. The court ruled that if a student’s education is at risk due to a lack of financial support, banks must not reject the loan application based on a low credit score. Instead, banks have been directed to adopt a more considerate and humane approach while processing student loan requests. This decision ensures that students can obtain financial assistance for higher education, which will ultimately help them secure better career opportunities.
Court’s Remark on Loan Approval
The Kerala High Court judge emphasized that a low credit score should not prevent students from applying for an education loan. The court pointed out that refusing to grant loans to students not only affects their future but also impacts the country’s development. As students play a crucial role in shaping the nation’s future, ensuring financial aid for their education is of national importance.
Case of Loan Rejection Due to Poor Credit Score
The case that led to this ruling involved a student whose education loan application was rejected. The student had previously taken a loan of ₹16,667, which was not repaid on time, leading to a low credit score. When the student applied for another education loan, the bank denied the application due to the poor credit history.
The student’s legal representative argued that denying the loan would severely impact the student’s future. The lawyer also revealed that the student had received a job offer from a reputed company, which would enable timely repayment of the loan.
When Can a Loan Application Not Be Rejected?
In a similar case in 2020, the High Court ruled that a student’s education loan application cannot be denied due to the poor credit score of their parents. The court emphasized that the student’s potential to repay the loan after securing employment should be the primary criterion for approval.
According to the ruling, the financial situation of a student’s family should not determine loan eligibility. Instead, banks should consider the student’s earning potential once they graduate and start working.
Court’s Directive on Loan Disbursement
In another significant case, the Kerala High Court ordered a financial institution to disburse ₹4,07,200 to an educational institution. While passing the order, the court also granted the concerned bank the right to file a counter affidavit. The case remains open for further hearings, ensuring that students facing similar financial difficulties receive a fair chance to complete their education.
A Game-Changing Decision for Loan Applicants
This ruling marks a major victory for individuals struggling with low credit scores. Whether for education loans or other financial assistance, banks can no longer refuse loans solely on the basis of a poor CIBIL score. This move will enable more students and individuals to access essential financial support, helping them build a better future without being unfairly penalized for past financial hardships.