Monday, October 6, 2008

What is a Sub Prime Loan

When someone goes to a bank or to any financial institution for a loan his credibility and financial strengths are reviewed. Based on his financial status he would be rated. A customer who is very credit worthy and has a consistent cash flow with which he can meet out his loan obligations is termed as a "PRIME" customer and such a loan would be termed as a Prime Loan.

On the other hand when the credit worthiness of the customer is not too good and he is not in a strong financial status he is termed as a "Sub Prime" Customer. When banks disburse loans to such customers, it is termed as a "Sub Prime Loan"

Usually the rate of interest charged by banks to sub prime customers is very high in comparison to Prime customers.

4 comments:

  1. that was a very good one anand
    thanks

    ReplyDelete
  2. Good that you have started blogging....All the best. Welcome to the Bloggers world!!!

    Looking forward to read more good posts from you... :)

    sivashankar...
    www.sivashankaronline.com

    ReplyDelete
  3. Good Start...
    Why don't you write in detail about the Income tax structure in India, in layman terms and the possible roundabouts that one can take to save the smallest possible fraction :)

    ReplyDelete

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