What is a Subprime Loan?
Accessed on 1/05/2007A subprime loan is a loan made to people with "subprime" credit scores. This would be anything under a credit rating of 620. A subprime loan has a higher interest rate and which is called a subprime rate. Subprime loans are typically used in the housing market when other types of loans cannot be secured. Subprime rates are charged on an online cash advance. Some people view this as a negative but others think these loans serve a consumer need where there are few other alternatives.
For instance, in the subprime home loan market, these loans were not just for people with bad credit ratings but also for people who did not qualify for a conventional loan because of credit lending limits. Jumbo home loans carry subprime interest rates but are a necessity in certain markets. As housing prices soared in various markets, many houses could not qualify for conventional loans having passed the official lending limit. However, subprime loans made it possible for home buyers to continue doing business in that market. In the same way, an online cash advance may have a subprime rate but if used appropriately it opens up the ability to finance short-term cash flow problems where no other suitable credit lending exists.
When taking out an online cash advance one must be aware of the subprime interest rate but decide whether this serves your needs or not. The interest rate is only one way of determining whether a loan product is of service to you or not. If there are few other alternatives or loan products available, then an online cash advance may be the right solution for you.
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