Who qualifies for a prime loan and what is sub-prime lending?
Potential borrowers who have good credit ratings, cash for a down payment and closing costs will qualify for prime loans. On the contrary, subprime lending refers to the practice of providing loans to borrowers who do not qualify for prime loans due to various risk factors, such as income level, size of the down payment made, credit history, and employment status. Subprime loans have a higher interest rate which often translates to tens of thousands of dollars worth over the life of a longer term loan.
