by 3 hours ago
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Subprime lending, also called "B-Paper", "near-prime" or "second chance" lending, is a general term that refers to the practice of making loans to borrowers who do not qualify for market interest rates because of problems with their credit history. Subprime loans or mortgages are risky for both creditors and debtors because of the combination of high-interest rates, bad credit history, and murky financial situations often associated with subprime applicants. A subprime loan is one that is offered at a rate higher than A-paper loans due to the increased risk. Subprime lending encompasses a variety of credit instruments, including subprime mortgages, subprime car loans, and subprime credit cards, among others. http://tinyurl.com/yu45vj
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Subprime lending is the practice of making somewhat risky loans to people with not-so-good credit at higher percentage rates than are available to the general creditworthy public. Some call these lenders "predatory lenders" because they tend to get people deep into debt who not only have bad credit but also don't understand very well how the credit system works. The lenders encourage too-heavy debt. The borrower gets kind of starry-eyed about what she/he might be able to obtain (house, expensive car, etc.) and ends up not being able to service the debt. She/he loses the house or car that secured the risky loan and ends up with nothing - except worse credit than ever.
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