Sub-prime loans – are those given to borrowers whose creditworthiness is below prime and risk is high and hence is of low quality. Prime loans on the other are the loans given to the most credit worthy customers, hence have low rate of interest compared to the sub- prime loans. The rate of interest for sub–prime loans is quite high. Sub-prime or low quality loans are mainly of three kinds: car loans, credit card loans and house mortgage loans.
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