Subprime Lending Law and Legal Definition

Subprime lending refers to loaning to businesses who do not qualify for prime rates, those rates reserved for borrowers with virtually blemish-free credit histories. The term subprime refers to the credit status of a borrower. These loans can spell disaster for borrowers. Subprime lending covers different types of credit, including mortgages, auto loans, and credit cards. Subprime borrowers usually have poor or limited credit histories and are typically perceived as riskier than prime borrowers. In order to compensate increased risk, lenders charge subprime borrowers a premium.