~12 min read
Encyclopedic overview
In finance, subprime lending (also referred to as near-prime, subpar, non-prime, and second-chance lending) is the provision of loans to people who may have difficulty maintaining the repayment schedule.
Subprime loans are characterized by higher interest rates, poor quality collateral, and less favorable terms in order to compensate for higher credit risk. During the early to mid-2000s, many subprime loans were packaged into mortgage-backed securities (MBS) and ultimately defaulted, contributing to the 2008 financial crisis.
Excerpted from Wikipedia’s “subprime lending” article, available under the CC BY-SA 4.0 licence.