Subprime Borrower


DEFINITION of 'Subprime Borrower'

A person who is considered a higher-than-normal credit risk. Subprime borrowers typically have a below-average credit history and are penalized for their poor credit with higher interest rates. Subprime borrowers may qualify only for higher-interest mortgages and higher APR credit cards. Subprime borrowers may have an extensive history of late or missed payments, default debt, excessive debt or no property assets that could be used as security. In the United States, subprime borrowers are often identified by having a FICO credit score below 640.

BREAKING DOWN 'Subprime Borrower'

Although subprime lending extends credit to people who may not otherwise qualify, the practice contributed to the subprime mortgage crisis in the U.S. in 2008. Roughly 80% of subprime borrowers were given adjustable-rate mortgages, and when the mortgages went to their higher interest rates, refinancing was difficult due to declining home values. This resulted in widespread mortgage default, foreclosures and the declining values of mortgage-backed securities.

  1. Foreclosure - FCL

    A situation in which a homeowner is unable to make principal ...
  2. Subprime Meltdown

    The sharp increase in high-risk mortgages that went into default ...
  3. Delinquent Mortgage

    A mortgage for which the borrower has failed to make payments ...
  4. Underwater Mortgage

    A home purchase loan with a higher balance than the free-market ...
  5. Distressed Borrower

    A borrower who is unable to fully repay his or her debt due to ...
  6. Adjustable-Rate Mortgage - ARM

    A type of mortgage in which the interest rate paid on the outstanding ...
Related Articles
  1. Credit & Loans

    New Credit Scoring Forgives Small Debt

    FICO 08 means that certain types of old debt won't affect your credit score, but it's not all good news.
  2. Retirement

    Conduct A Financial Intervention

    Find out what you can do to help someone who is finanically out of control.
  3. Credit & Loans

    5 Keys To Unlocking A Better Credit Score

    Follow these tips and techniques to rebuild a ruined credit rating.
  4. Credit & Loans

    A Guide To Debt Settlement

    Find out how you can negotiate your way to a lower debt load by paying up front.
  5. Budgeting

    Debt Consolidation Made Easy

    These five steps can help get you out of debt faster and easier than you'd ever imagined.
  6. Credit & Loans

    Take Control Of Your Credit Cards

    The plastic in your wallet doesn't have to hurt your finances. Learn how to manage it responsibly.
  7. Credit & Loans

    The Importance Of Your Credit Rating

    A great starting point for learning what a credit score is, how it is calculated and why it is so important.
  8. Professionals

    Why Bad Credit Is Bad For Financial Careers

    In order to obtain and maintain a career in the financial industry, it is also important to have a clean credit report.
  9. Credit & Loans

    How Credit Cards Affect Your Credit Rating

    The average American household has four cards, but does that mean more is better?
  10. Options & Futures

    How To Establish A Credit History

    Can't get a credit card without a credit history, and can't get a history without a card? Break the Catch-22.
  1. Do FHA loans have prepayment penalties?

    Unlike subprime mortgages issued by some conventional commercial lenders, Federal Housing Administration (FHA) loans do not ... Read Full Answer >>
  2. Can FHA loans be refinanced?

    Federal Housing Administration (FHA) loans can be refinanced in several ways. According to the U.S. Department of Housing ... Read Full Answer >>
  3. Can FHA loans be used for investment property?

    Federal Housing Administration (FHA) loans were created to promote homeownership. These loans have lower down payment requirements ... Read Full Answer >>
  4. Is Apple Pay safe and free?

    Apple Pay is a mobile payment system created by Apple to reducing the number of times shoppers and buyers have to pay for ... Read Full Answer >>
  5. Do FHA loans have private mortgage insurance (PMI)?

    he When you make a down payment from 3 to 20% of the value of your home and take out a Federal Housing Administration (FHA) ... Read Full Answer >>
  6. Can you use your Walmart credit card at Sam's Club?

    Consumers can use their Walmart credit cards to shop at Sam's Club. However, they cannot use their Walmart credit cards when ... Read Full Answer >>

You May Also Like

Hot Definitions
  1. Cyber Monday

    An expression used in online retailing to describe the Monday following U.S. Thanksgiving weekend. Cyber Monday is generally ...
  2. Bar Chart

    A style of chart used by some technical analysts, on which, as illustrated below, the top of the vertical line indicates ...
  3. Take A Bath

    A slang term referring to the situation of an investor who has experienced a large loss from an investment or speculative ...
  4. Black Friday

    1. A day of stock market catastrophe. Originally, September 24, 1869, was deemed Black Friday. The crash was sparked by gold ...
  5. Turkey

    Slang for an investment that yields disappointing results or turns out worse than expected. Failed business deals, securities ...
  6. Barefoot Pilgrim

    A slang term for an unsophisticated investor who loses all of his or her wealth by trading equities in the stock market. ...
Trading Center