Prime Versus Sub-Prime Lenders

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What Does It Mean to Be a Prime or Subprime Borrower?

Prime borrowers are considered the least likely to default on a loan. Subprime borrowers, meanwhile, are viewed as higher default risks due to having limited or damaged credit histories. Please refer to our section on credit scores to understand the variations and use of credit scores. Lenders typically use a speedometer Score ranges to categorise loan applicants. Consumers with scores in the top range, or excellent, are the most prime (or "super-prime"), and borrowers in the bottom, or very poor range are considered " subprime.”

Prime vs. subprime credit score ranges used can vary by lender. For example, some lenders may use Experian only, others may use Equifax only and others will use a mixture of both

  • Super-prime or Excellent - 961-999  
  • Prime or Good - 881 - 960   
  • Near-prime  or Fair - 721 - 880 
  • Subprime or Poor - 561 - 720 
  • Deep subprime or very poor 0- 560
  • The biggest difference between prime and subprime loans will usually be in the interest rates they charge. It's generally viewed as riskier to lend to borrowers with impaired or limited credit histories, so lenders charge higher rates to compensate for that risk.

There may be other differences, as well. Prime loans, for instance, maybe offered in larger loan amounts. Subprime loans, on the other hand, may require larger deposits or charge higher arrangement fee

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