Define: Subprime Loan

Business, Legal & Accounting Glossary

Definition: Subprime Loan



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Full Definition of Subprime Loan


A subprime loan is a loan given to a borrower at an interest rate higher than the prime rate. When a borrower has a low credit score, he may not qualify for a traditional loan, though he may qualify for a subprime loan. A subprime loan is also used when a borrower with decent credit prefers not to disclose his financial information. A borrower with high-interest rate credit card debt can also opt for a subprime loan to save on interest payments. A subprime mortgage, a subprime credit card, or a subprime auto loan are all forms of a subprime loan. Subprime loan rates and terms and conditions of a subprime loan can vary significantly between lenders. In early 2007, the subprime loan market, in particular, the subprime mortgage market, came under intense scrutiny when the subprime crisis began with a sharp increase in home foreclosures and subprime loan providers declaring dramatic losses or bankruptcy in some cases. This was the beginning of a major subprime crisis that ultimately affected other sectors of the US economy.


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Subprime Loan. PayrollHeaven.com. Retrieved April 06, 2020, from PayrollHeaven.com website: https://payrollheaven.com/define/subprime-loan/

Definition Sources


Definitions for Subprime Loan are sourced/syndicated and enhanced from:

  • A Dictionary of Economics (Oxford Quick Reference)
  • Oxford Dictionary Of Accounting
  • Oxford Dictionary Of Business & Management

This glossary post was last updated: 6th February, 2020