 TITLE: What Is the Difference Between a Prime Loan and a Subprime Loan? CONTENT: Prime Loans vs. Subprime Loans\n------------------------------\nWhen lenders consider your loan application, they assess factors including your credit score, credit history and debt-to-income ratio (DTI) to determine your creditworthiness and how much risk you present as a borrower. You might be considered high risk if you are new to credit, if you have a fair or poor credit score, or if your credit history shows serious negative events such as a bankruptcy in your past.\nLenders use risk-based pricing to set loan terms such as interest rates and fees. There are different credit scoring models, and each lender may have its own criteria for assessing your creditworthiness. A FICO® Score☉ of 670 to 739 is considered prime and generally qualifies you for loans at competitive rates, if your FICO® Score is 740 or above, you're considered super prime and can qualify for the lowest rates.\nExperian generally defines subprime borrowers as those with a FICO® Score of 580 to 669, or fair credit. Subprime loans include many of the same types of loans open to prime borrowers; there are subprime mortgages, auto loans and personal loans (and subprime scores can vary depending on the type of loan and lender). But because these loans are designed for subprime borrowers, there are some key differences.\n*   **Higher interest rates**: Subprime borrowers are viewed as a greater lending risk compared with prime borrowers, so lenders tend to charge higher interest rates to protect themselves.\n*   **Larger down payments**: If you're getting a subprime mortgage or car loan, you'll usually have to make a bigger down payment than you would for a prime loan of the same size.\n*   **Smaller loan amounts**: Subprime borrowers may not be able to borrow as much as prime borrowers.\n*   **Higher fees**: Lender fees such as origination and late payment fees are typically higher for subprime loans.\n*   **Longer repayment periods**: Subprime loans often take longer to pay back than prime loans. The term of a subprime car loan, for example, might be 60 months compared with 36 months for a prime loan of the same amount. Longer repayment periods reduce your monthly payments, but usually mean you will pay more in interest over the loan term.\n*   **Adjustable interest rates**: Fixed interest rates don't change over the life of a loan, but many subprime loans have adjustable interest rates. Adjustable interest rates are locked for a set period; after that, they typically adjust every year, which can lead to steep increases in both monthly payments and total interest. END