Sponsored Links :
What Are Subprime Loans ?
Consider these examples. Alex, an employee, has a very bad credit history. Samar, an emigrant, is new to the country and wants to buy a car immediately. Sarah earns less salary but she wants to own a car. |
Roger, owner of a company that went bankrupt last year, wants to buy a new home. Alex, Samar, Sarah and Roger will need loans.But will they be able to avail loans from prime lenders? The answer is no. Why? Because, these people fall into the segment of high-risk customers and no prime lenders would want to lend loans to this segment. This is either because the lender fears that the customers may default the loan re-payment or does not view him/her to have sufficient funds for loan re-payment.
So, what are their other options? The option comes in the form of subprime loans. Yes, subprime loans are loans given to customers who fall in the high-risk category. Since these customers fall in the high-risk category, they are given loans with a higher rate of interest. This high interest rate would require them to pay over $20,000 to $70,000 more, over the tenure of the loan, as compared to the traditional loans. However, the interest rate offered by various subprime lenders is different and it helps to shop around and negotiate for a suitable interest rate.
Nevertheless, availing subprime loan can be advantageous for some customers, especially those who are paying a higher interest rate for credit card debt. Another advantage is that the high-risk customers can repair their credit history, if they maintain an excellent payment record and will be eligible for the traditional loans after 2 to 3 years.
More Articles :
|
