What is Subprime?
Subprime can refer to a loan or a lender. Subprime means less than prime, as in prime rate. If the prime rate was 6% then a subprime rate would be a higher rate like 8%. Subprime loans are more expensive than mainstream loans due to their interest. Subprime loans appeal to borrowers with sub-par credit. Borrowers with a blemished financial record or a limited credit history can borrow with a higher interest rate to compensate for increased credit risk.
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