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by dragonwriter
2490 days ago
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> Subprime generally means enticing debtors with interest rates below prime No, subprime lending refers to riskier loans, usually with commensurately worse terms, offered to people with less-than-prime credit status. It has nothing to do with the prime rate, and I have no idea where you got that idea. I mean, as folk etymology goes it's superficially plausible, but it's one of those things that I think wouldn't survive even the most casual contact with the use of the term in the wild. https://www.gardenstateloans.com/mortgages/whats-the-differe... https://en.m.wikipedia.org/wiki/Subprime_lending |
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Everything you say is true, but its also true over 90% of subprime loans were ARMS (adjustable rate mortgages)[1], leading to the subprime mortgage crisis, where the interest rates started off below prime and gradually increased to over prime to compensate for the risk of the borrower.
https://en.wikipedia.org/wiki/Subprime_mortgage_crisis