In the finance world subprime lending is when loans are made
to people who are going to struggle to maintain the repayments. With these
types of loans there normally comes higher interest rates to try and compensate
for the high levels of risk being taken with the customer.
Being classified as
a subprime lender comes from an individual’s credit rating, or lack of one. This
can be classified by a history of late payments or a failure to repay historic
debt completely or even the current amount of debt the individual currently
holds. You can also fall into this category through the lack of experience you
have, for example if you have limited debt experience or nothing to use as a
security against loans. This is how so many first time buyers fell into this
category and became subject to the subprime mortgage lending sharks.
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