A subprime loan is a "type of loan that is offered at a rate above prime to individuals who do not qualify for prime rate loans. Quite often, subprime borrowers are often turned away from traditional lenders because of their low credit ratings or other factors that suggest that they have a reasonable chance of defaulting on the debt repayment.
"Subprime loans tend to have a higher interest rate than the prime rate offered on traditional loans. The additional percentage points of interest often translate to tens of thousands of dollars worth of additional interest payments over the life of a longer term loan.
"However, getting a subprime loan could still be a good idea if the loan is meant to pay off a higher interest debt (such as credit card debt) and the borrower has no other means for payment.
"The specific amount of interest charged on a subprime loan is not set in stone. Different lenders may not value a borrower's risk in the same manner. This means that a subprime loan borrower has an opportunity to save some additional money by shopping around."
Related SourceWatch articles
- Association of Community Organizations for Reform Now (ACORN)
- Federal housing and mortgage legislation (U.S.)
- front groups and industry organizations
- Sue Kirchhoff and Sandra Block, "Subprime loan market grows despite troubles," USA TODAY, December 7, 2004; updated December 14, 2004.
- Kimberly Blanton, "Dark side of subprime loans. Mortgages for those with bad credit leap in popularity despite high foreclosure rate," Boston Globe, August 3, 2005.
- "Losing Ground: Foreclosures in the Subprime Market and Their Cost to Homeowners," Center for Responsible Lending, December 19, 2006.
- Marni Leff Cottle, "Foreclosures more likely, report warns. Prevalence of subprime loans invites future financial crises; research group calls for reform," San Francisco Chronicle, December 20, 2006.
- "Center for Responsible Lending Report Predicts 2.2 Million Subprime Borrowers Face Foreclosure," Public Citizen, December 21, 2006.
- Joshua Lipton, "Outlook For Subprime Lenders Seen As Tough," Forbes, February 13, 2007.
- "Subprime Lending Crisis: Millions of Families Face Losing Their Homes to Foreclosure," Democracy Now!, April 4, 2007.
- Jack Guttentag, "The Good That Subprime Loans Do," Washington Post, September 8, 2007.
- Ellen Schloemer, Director of Research and Communications, Self-Help and Center for Responsible Lending, Letters to the Editor: "Don't Blame the Subprime Borrowers," Washington Post, September 21, 2007.
- "Clinton wants to stem foreclosures," The Politico, August 7, 2007.
- Clifford Krauss, "States Begin Action on Subprime Lending," New York Times, August 24, 2007.
- Edward Glaeser, "Vilifying Lenders," New York Sun, September 18, 2007.
- "How We Got Into the Subprime Lending Mess," Knowledge@Wharton, September 19, 2007.
- Elizabeth Warren, "Mortgage brokers' sleight of hand," Boston Globe, October 2, 2007.
- Crystal Jarvis, "Firms capitalize on fallout from subprime lending," Birmingham Business Journal, October 12, 2007.
- "Watt, Miller tackle predatory loans," News & Observer (N.C.), October 22, 2007.
- Jessica Holzer, "Bill would set minimum standards for home-loan underwriting," The Hill, October 23, 2007.
- Erika Loveley, "New bills aim to help delinquent borrowers," The Politico, October 23, 2007.
- The Mortgage Lender Implode-O-Meter. "Tracking the housing finance breakdown: a saga of corruption, stupidity, and government complicity."
- subprime lending and subprime mortgage financial crisis in the Wikipedia.
- "Mortgage Basics: Subprime mortgages," Bankrate.com, May 1, 2006.
- Jack Guttentag, "What Is a Sub-Prime Mortgage Lender?" MTGProfessor.com, March 22, 2004, Revised August 1, 2006, February 26, 2007.
- "Where to Turn for Help," Washington Post, September 2, 2007.