Subprime

DEFINITION of 'Subprime'

A classification of borrowers with a tarnished or limited credit history. Lenders will use a credit scoring system to determine which loans a borrower may qualify for. Subprime loans carry more credit risk, and as such, will carry higher interest rates as well. Approximately 25% of mortgage originations are classified as subprime.

BREAKING DOWN 'Subprime'

Occasionally some borrowers might be classified as subprime despite having a good credit history. The reason for this is because the borrowers has elected to not provide verification of income or assets in the loan application process.

The loans in this classification are called stated income and/or stated asset (SISA) loans or even no income/no asset (NINA) loans.

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