A loan consists of two factors – Principal amount and Interest amount. The Principal amount remains the same for all the applicant irrespective of what their credit score is, but depends on their income. But what matter is or makes a difference is the interest rate, which majorly depends on your credit score. If you have a good credit score, the banks can trust your credit worthiness and your repayment capacity. The higher your credit score the higher is the chances of getting your loan approved. This also gives you a power to negotiate for a lower interest rate with the banks.

The lower the credit score, the riskier it becomes for the banks to lend you money. They tend to have less confidence in your credit worthiness and hence, fear to lend money. Most of the lenders will charge you a high interest rate and sometimes banks may also reject your loan application.

What makes a huge difference is the total amount that you will end up paying in the long run. The difference in the interest amount due to your credit score will result in paying a large amount during the end of your installment, when you sum up all your monthly payments. A person who had borrowed with a lower interest rate when compared to a person who had borrowed at a higher interest rate but both having the same repayment period, the person with lower interest rate will end up paying less than the other person.

Generally, any score above 700 is considered as a good credit score. But if you have a score of above 750, you’ll possibly get a loan at a good interest rate.    
Therefore, before applying for a loan, it is always advisable to check your credit report if you have a low credit score and fix all the errors that’s showing up in your credit report. Wait and improve your credit score before you approach a bank.