Subprime

Encyclopedia : S : SU : SUB : Subprime

Subprime (also sub-prime or B-Paper) describes a specific lending market sector. Typically, subprime products (e.g., loans, mortgages, or credit cards) are for persons with blemished or limited credit history - those who do not qualify for the prime rate market. These products usually carry a higher rate of interest than prime products to compensate for increased credit risk. Subprime lending is typically a 2 year fixed and a 28-48 year adjustable. There are occasionally options to 'fix' a subprime rate, but it is a adjustment to the rate that makes it not worthwhile. Subprime lending commonly originates from different lenders than A-paper, or at least different divisions within a company. Subprime lending can be leniant on Bankruptcies and Foreclosures, though it is usually requires one year from forclosure.

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