Thursday, 31 October 2013

Best Things about Subprime Credit

Subprime borrowers have access to bank credit cards, retail credit cards and auto loans. In the last few years bank-issued credit cards lending to subprime have witnessed a considerable rise in numbers. Banks are doing it to grow lending power by providing credit opportunities to more consumers as well as woo back rejected applicants. So, borrowers have been consistently taking advantage of the new opportunities. They have begun to look for diversified financial activity.

Following are a few of the best things about subprime credit and how this type of loan can be beneficial to a bank and a borrower.

Best things about subprime credit from a bank’s point of view:
  • It helps to boost economic growth. This is because investors are banking sector’s growth prospectsin the post-recessionor post-crisis world.
  • The high credit risk offered by banks is coupled with higher interest rates, poor quality collateral, and less favorable terms.
  • Subprime lenders pay higher premiums, and the loans are generally secured against saleable real-estate. So these loans theoretically can never fail.

Best things about subprime credit from a borrower’s point of view:
  • A borrower’s employment, income and assets sometimes do not get verified in such loans.
  • People who have difficulty maintaining the repayment schedule due to setbacks such as unemployment, divorce, medical emergencies are entitled to get these loans.
  • People who normally wouldn’t have had any access to the credit market now enjoy credit through these loans.
Hence these subprime credit loans are equally beneficial to both lender and borrower.


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