Subprime Lender
A type of lender that specializes in lending to borrowers with a tainted or limited credit history. Subprime lending is more concentrated in a smaller number of large lenders than prime lending. The subprime loan market is more tiered compared to the prime loan market, where terms and rates vary little between borrowers. Investopedia Says:
Subprime lenders use a risk-based pricing system to calculate the terms of loans, including the interest rate, which they offer to borrowers with varying credit histories. The securities issued by subprime lenders tend to carry more credit risk but less interest rate risk than securities backed by prime loans. This is because subprime borrowers tend to have a shorter time horizon and fewer opportunities to refinance when interest rates fall. Related Terms:
3/28 Adjustable Rate Mortgage - 3/28 ARM
Credit Rating
Credit Risk
Interest Rate Risk
Mortgage
Predatory Lending
Prepayment Penalty
Prime
Second Chance Loan
Subprime |