Subprime lending rates are 1) than prime lending rates and are commonly offered to people with credit scores.

Subprime lending rates are “higher” than prime lending rates and are commonly offered to people with “poor” credit score.

Further Explanation:

Subprime lending rate:

The subprime lending rate is the rate of interest charged by the banks. It is always higher than the prime lending rates. There is no need for a mortgage in the case of subprime lending. That’s why the interest charged on this is higher than the prime lending. Subprime lending is given to those customers which having poor credit scores.  

Prime lending rate:

The prime lending rate is the rate of interest charged by the banks to provide prime lending. Prime lending is given to those customers who have good credit scores. This type of lending is given to trustworthy customers. In this lending, there is a necessity of mortgage in case of lending without the mortgage; the loan will not be issued to the customers.

As in subprime, lending rates are higher than the prime lending rates because the risk involved in the subprime lending is more than the prime lending. If the customer fails to pay the amount of loan in subprime lending, the lender does not have any mortgage value to get back their loan amount. This lending is offered to those people who have a poor credit score. A credit score basically means a score that shows how much probability the customers will pay back the loan amount.  

Learn more:

1.Learn more about credit score

2.Learn more about mortgage

3.Learn more about credit utilization value

Answer details:

Grade: Middle School

Subject: Accounting

Chapter: Types of loans

Keywords:subprime lending rates, prime lending rates, higher, poor credit score, mortgage, rate of interest, trustworthy customers, the interest charged.

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