What is a Subprime Loan?
What is a Subprime Loan?… Many people see the word “Subprime” and wonder what the heck it means. Well just in case you don’t know … You are not the only one. Subprime lending is simply another way to say bad credit, poor credit, busted credit, bruised credit, torn up credit, ugly credit, oogly credit ok ok we’ll stop there I’m sure you get the point;-)
A subprime loan can be offered in any category e.g. subprime mortgage loans, subprime auto loans, subprime credit card loans, etc. A popular category where this phrase has been used a lot is with subprime mortgage loans.
A subprime mortgage loan has the same basic characteristics as any bad credit loan. Being that it involves a much Higher risk to service the bad credit segment, these loans will contain higher rates & fees compared to traditional loans.
Higher default rate = Higher fees. Subprime Lenders must charge more as a safeguard to offset their costs of servicing high risk accounts. It’s just more expensive and more work to service bad credit borrowers (Subprime) as apposed to good credit borrowers (Prime).
You can find Subprime Lenders by scouring the web, through loan brokers, word-of-mouth – or by searching anywhere in this web center because this what we specialize in.
Typically, to be considered a subprime borrower, your credit score usually has to fall around 620 or lower.
What is a Subprime Loan? The Popularity Boost
Recently, you may have heard this Subprime word widely used due to the big Subprime Mortgage Meltdown. This is basically an issue where banks OVERlended to people with bad credit, issuing highly questionable loans. Loans that were issued out irresponsibly, not only causing countless homeowners to lose their homes – but it also put the entire U.S. Nation in jeopardy.
Major Banks miscalculated how many people would end up defaulting on their loan once it matured. You see, most subprime homeowners were put into what is called an Adjustable Rate Mortgage (ARM). The shaky thing about this type of loan is that it fluctuates with market and can all of a sudden balloon out skY HiGH throwing unsuspecting homeowners off balance – leaving them in an upside down financial state.
Lots of homes went into foreclosure because homeowners couldn’t handle the unexpected increase in their payments — Now the banking institutions were left holding the bag looking stupid with all these Homes Loans Gone Wild!
As a result of the whole economical trauma, there were so many foreclosed homes and banks couldn’t get rid of them fast enough — especially due to the unanticipated crash in the real estate market in the plummeting demise of home values.
This caused the Real Estate Market to take a HARD HIT!!!
The U.S. Government now had no choice but to step in and bail the troubled U.S. Nation out of this huge mess. And that’s basically the scenario in a nutshell. If you want to learn more about the Subprime Mortgage Crisis follow the link.
Now fast forwarding to today… this is why lenders are very much more selective and responsible with their lending practices. You must definitely meet higher quality standards in today’s lending market even with bad credit.
But although now-a-days it’s not as easy to get the cash you need, it is still possible with the proper guidance. This is what we’re here for: To bring you the best subprime lending information and resources available today.
So What is a Subprime Loan? – A Subprime Loan or Bad Credit Loan is a Second Chance Opportunity for citizens with damaged credit.