Loans offered at a rate greater than the prime rate are called subprime loans, and are offered to customers who do not qualify for prime-rate loans. You get a loan based on your credit score, which is usually calculated by FICO(Fair Isaac Credit Organization). FICO scores range between 300 and 850; the higher your score, the more deserving of credit you are viewed to be. If your score is below 620, you normally do not qualify for a regular loan and must then look to the subprime market.
Subprime loans have higher rates than prime-rate loans and also have higher fees. Prime rate loans are normally quite similar from lender to lender while sub-prime loans are not. They can vary a great deal. This is because of risk-based pricing, a process used to calculate mortgage rates and terms. This means that the worse your credit is, the higher your rate and the more expensive your loan will be.
Subprime loans have higher rates than prime-rate loans and also have higher fees. Prime rate loans are normally quite similar from lender to lender while sub-prime loans are not. They can vary a great deal. This is because of risk-based pricing, a process used to calculate mortgage rates and terms. This means that the worse your credit is, the higher your rate and the more expensive your loan will be.
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