Changes

Subprime loans have a higher interest rate than the prime rate offered on traditional loans. The additional percentage points of interest often translate to tens of thousands of dollars worth of additional interest payments over the life of a longer term loan. It is meant to compensate the lender for the additional risk that is taking on a subprime borrower.

Subprime loans have a higher interest rate than the prime rate offered on traditional loans. The additional percentage points of interest often translate to tens of thousands of dollars worth of additional interest payments over the life of a longer term loan. It is meant to compensate the lender for the additional risk that is taking on a subprime borrower.

Subprimes loans represented about 20 per cent of the $3-trillion US mortgage market in 2006.  Hundreds of billions of dollars' worth of subprime mortgages have been gathered together and resold as bonds to[[ hedge funds]] and [[bank|banks]] all over the world. The buyers could used them as collateral to secure more loans so they could buy more bonds and so on and so on.

Subprimes loans represented about 20 per cent of the $3-trillion US mortgage market in 2006.  Hundreds of billions of dollars' worth of subprime mortgages have been gathered together and resold as bonds to [[hedge_fund|hedge funds]] and [[bank|banks]] all over the world. The buyers could used them as collateral to secure more loans so they could buy more bonds and so on and so on.

[[Category:Economics]]

[[Category:Economics]]