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How does good or bad credit score affect the interest rate in personal loan? Here is the complete mathematics – Top News Bulletin


money in emergency To meet our needs, we all take personal loans. Banks also give personal loans easily. However, huge interest is charged on this. If your credit score is bad then banks charge very high interest. Today in this story, we will tell you how important a role credit score plays in determining the interest on personal loan. How your better credit score helps in getting loan at low interest. Let us understand the complete mathematics of credit score.

What is credit score?

Credit score is calculated based on your credit history. A score is given in points to determine whether the credit score is good or bad. Credit score is decided on payment history, credit utilization, credit mix and credit history. Banks easily give loan to a person with a good credit score.

Role of credit score in taking loan

  1. Good Credit Score: If you have a good credit score, in most cases above 700 or 750, then the bank considers you a good customer. He easily gives you loan.
  2. Bad Credit Score: On the other hand, if you have a poor credit score that is below 600 or 620, the bank may place you in a high-risk category. The bank adopts a very cautious approach in giving money.
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Effect of credit score on personal loan interest

  • 1. Risk Assessment by the Bank: A good credit score above 750 often indicates that the person has taken and repaid loans responsibly in the past. A poor credit score (below 600) means that the person does not have a good loan repayment history.
  • 2. Determination of interest rates: Your credit score directly impacts the interest rates offered to you. A good score usually qualifies you for a loan at a lower interest rate.
  • 3. Score more than 750: Scores above 750 often have better terms associated with them, including lower personal loan rates or flexible repayment terms.
  • 4. Quick loan approval: Good credit score not only affects the interest rate but also speeds up the loan application process.
  • 5. Loan amount and repayment period: Additionally, a good credit score benefits you in terms of loan amount and repayment tenure.



Image Credit: India-Tv.

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