What Is Subprime?

Patrick Curtis

Reviewed by

Patrick Curtis WSO Editorial Board

Expertise: Investment Banking | Private Equity

Subprime refers to a group of debtors with a poor credit history / rating, meaning they are less likely to repay their debts than other borrowers. Using the FICO system, an individual with a score of less than 640 is classified as subprime. Due to the higher risk of default, subprime loans are more risky than prime loans and therefore the subprime borrowers will be charged a higher interest rate which is ironic as they are the ones least likely to be able to pay the interest.

Subprime mortgage lending along with mortgage securitization was one of the main causes of the 2007-2008 financial crisis.

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Patrick Curtis

Patrick Curtis is a member of WSO Editorial Board which helps ensure the accuracy of content across top articles on Wall Street Oasis. He has experience in investment banking at Rothschild and private equity at Tailwind Capital along with an MBA from the Wharton School of Business. He is also the founder and current CEO of Wall Street Oasis. This content was originally created by member WallStreetOasis.com and has evolved with the help of our mentors.