 TITLE: What to Know About Subprime Loans CONTENT: How Does a Subprime Loan Work?\n------------------------------\nSubprime loans are designed for people who are struggling with their credit. Either you're just starting to build credit and you have a \"thin\" credit file (with four or fewer credit accounts), or you've made some mistakes in the past and are rebuilding your credit history.\nInstead of requiring you to wait until you have good or excellent credit to get a loan, subprime loans allow you to get the money you need when you need it.\nSubprime lenders offer many of the same loans you can get with good or excellent credit, including subprime auto loans, subprime mortgages and subprime personal loans. Here are some features, though, that can differ:\n*   **Higher interest rates**: Subprime loans typically charge higher interest rates than prime loans. Depending on the type of loan, the difference can be a few percentage points or it can be 10 or more. On short-term loans, this might not be a big deal. But with an auto loan or mortgage, it could mean thousands or even tens of thousands more in interest charges.\n*   **Larger down payments**: Auto and mortgage lenders typically require a larger down payment to help make up for the higher level of risk with subprime loans. With a car loan, for instance, you may need to put down 10% or more rather than 0% to 5% as a down payment, which is typical for borrowers with good or excellent credit. And while personal loans don't require a down payment, you may need to put up your savings as collateral in the event that you default.\n*   **Higher fees**: Subprime loans are more likely to charge origination fees than prime personal loans, and you may also see steeper late-payment fees. END