“Same Loan, Different Interest Rates—Why? 
”
I applied for a loan and got a higher interest rate than my friend for the same amount! Banks say it’s based on credit scores, but how much does a small difference (750 vs. 800) really matter?
Can you negotiate a lower rate with an average score?
The interest rates which banks offer for loans depend on credit scores because higher scores result in lower interest rates. A minimal change between 750 and 800 credit score points will result in different loan payment amounts. Borrowers with lower scores appear riskier to banks which results in higher interest rates.
Banks generally provide negotiation options to borrowers who demonstrate stable income or positive repayment history or maintain an ongoing banking relationship. A high credit score combined with financial stability enables borrowers to obtain improved loan conditions.
When I first applied for a personal loan, I realized that my credit score had a direct impact on the interest rate I was offered.
Since I had maintained a good repayment history and kept my credit utilization low, the bank considered me a lower-risk borrower and offered me a comparatively lower rate of interest.
On the other hand, I’ve seen friends with average or poor credit scores end up paying higher interest because the bank views them as higher-risk customers.
Banks primarily assess creditworthiness through your credit score.
A higher score signals that you have a strong repayment record, stable financial behavior, and are less likely to default.
This gives banks the confidence to offer you loans at lower interest rates. Conversely, a lower score suggests higher risk, and banks may charge higher interest rates to cover that potential risk.
Apart from the credit score, banks also consider factors like your income, repayment capacity, type of loan, and existing debt before finalizing the rate.
You can read more about how credit scores impact loan eligibility and interest rates on the official website of TransUnion CIBIL:
https://www.cibil.com/knowledge-base/how-credit-score-affects-loan-eligibility