DEFINITION of 'Subprime Lender'

A type of lender that specializes in lending to borrowers with a tainted or limited credit history. Subprime lending is more concentrated in a smaller number of large lenders than prime lending. The subprime loan market is more tiered compared to the prime loan market, where terms and rates vary little between borrowers.

BREAKING DOWN 'Subprime Lender'

Subprime lenders use a risk-based pricing system to calculate the terms of loans, including the interest rate, which they offer to borrowers with varying credit histories. The securities issued by subprime lenders tend to carry more credit risk but less interest rate risk than securities backed by prime loans. This is because subprime borrowers tend to have a shorter time horizon and fewer opportunities to refinance when interest rates fall.

  1. Subprime Loan

    A subprime loan is a loan offered at a rate above prime to individuals ...
  2. Subprime Market

    The market for lenders and borrowers of subprime credit, a credit ...
  3. Subprime Auto Loan

    A type of auto loan approved for people with substandard credit ...
  4. Subprime

    Subprime is a classification of borrowers with a tarnished or ...
  5. Subprime Credit Card

    A type of credit card issued to people with substandard credit ...
  6. Subprime Meltdown

    The subprime meltdown includes the economic and market fallout ...
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  1. What is a subprime mortgage?

    A subprime mortgage is a type of loan granted to those who would not be able to qualify for conventional mortgages, usually ... Read Answer >>
  2. How does a credit crunch occur?

    A credit crunch occurs when there is a lack of funds available in the credit market, making it difficult for borrowers to ... Read Answer >>
  3. What are the similarities and differences between the savings and loan (S&L) crisis ...

    Learn about some of the similarities and differences between the savings and loan crisis and the subprime mortgage crisis ... Read Answer >>
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