What is Subprime?
Definition of Subprime
It is a grouping of borrowers with a bad or limited credit history. Lenders will use a credit scoring system to determine the eligibility of a borrower for loans. Subprime loans carry more credit risk as well as higher interest rates.
Explanation of Subprime
The term subprime refers to the credit quality of particular borrowers, who have weakened credit histories and a greater risk of loan default than prime borrowers. There are some common factors that increase the subprime risks, such as: limited debt experience, excessive debt, default debt etc.