Subprime loans are a category of loans with relatively high interest rates and fees that are offered to borrowers with less-than-ideal credit. So if you get a subprime loan, it’s usually because you can’t qualify for a conventional loan—in other words, one with better borrowing terms.

An example would include a marginal credit score, say 660, a limited down payment, say 5% down, and a borderline DTI. Together, the attributes push the loan into Alt-A territory.

Borrowers with a low credit score (less than 620) or limited credit history. Mortgages with debt-to-income ratios for borrowers of 50% – 55% as compared to the standard 43% ratio for most mortgages. A higher debt-to-income ratio allows the borrower to qualify for a larger mortgage amount.

Subprime borrowers are individuals who are considered to represent a higher risk to lenders. They typically have credit scores below 670 and other negative information in their credit reports. Subprime borrowers may find it harder to obtain loans and will usually have to pay higher interest rates when they do.

between 580 and 669

Deep subprime borrowers have credit scores that fall below 580, as defined by the Consumer Financial Protection Bureau (CFPB) Consumer Credit Panel. While credit score categories can vary between financial institutions, anyone classified as deep subprime has a very low credit score.

Experian generally defines subprime borrowers as those with a FICO® Score of 580 to 669, or fair credit. Subprime loans include many of the same types of loans open to prime borrowers; there are subprime mortgages, auto loans and personal loans (and subprime scores can vary depending on the type of loan and lender).

Someone taking out a subprime auto loan usually has lower credit scores or no credit scores at all, so a lender typically charges higher interest rates and fees. Why? Because these loans often have higher delinquency rates than loans made to car buyers with higher credit scores.

Occasionally, some borrowers might be classified as subprime despite having a good credit history. The term subprime gets its name from the prime rate, which is the rate at which people and businesses with an excellent credit history are allowed to borrow money.

In many cases, you can escape from a predatory secured loan, such as a mortgage or car loan, by refinancing it with a different lender. When you refinance, you’re effectively taking out a new loan to pay off your current, abusive one.

1. 3-digit interest rates. One of the biggest warning signs of predatory lending is high, three-digit interest rates.
2. Add-on loan services and costs.
3. Fees or charges for low (or no) credit scores.
4. High-risk secured lending.
5. Rushed approval or paperwork.
6. Loan flipping.
7. Lying to you (or asking you to lie)

8% per year

Predatory lending is pervasive across the U.S., but the most common targets for predatory loans are the low-income, the low-credit, the elderly, minorities, and other groups who may otherwise be unable to obtain traditional mortgage loans, auto loans, personal loans, and other consumer loans as a result of their …

Predatory lending is any lending practice that imposes unfair and abusive loan terms on borrowers, including high interest rates, high fees, and terms that strip the borrower of equity. Predatory lenders often use aggressive sales tactics and deception to get borrowers to take out loans they can’t afford.