Sub-Prime lending, which factor alone can make it more
is also referred to as difficult for the buyer to repay
near-prime, B-Paper, and the loan on a timely fashion.
second chance lending, has Since the person taking out the
garnered a great deal of loan generally has a history of
attention recently. This is defaulting on loans or making
largely because this type of late payments, there are
lending is considered to be risky additional risks involved with
for both the borrower and the sub-prime lending.
lender and many people have felt
the sting of a sub-prime loan Who Engages in Sub-Prime Lending?
that has gone awry.
Some lending institutions
What is Sub-Prime Lending? specialize only in sub-prime
lending while others offer it as
Sub-prime lending is a type of one more type of loan that can be
loan that is given to a person provided to those looking to buy
that does not qualify for the real estate. Therefore, if you
best available interest rates. are interested in a sub-prime
This is usually because the loan, you have many options
person looking to buy the real available to you.
estate has a poor credit history
and, therefore, does not qualify Many critics of sub-prime lending
for a regular real estate loan. believe that lending institutions
that supply these loans are
Since sub-prime loans are given preying on desperate individuals
to those with poor credit and are taking advantage of a bad
histories, the interest rates on situation. Some critics believe
these loans are much higher than that sub-prime lenders are
a standard real estate loan. This deliberately seeking out people
that will be unable to repay repossessed and your credit will
their loans so they can foreclose become even worse.
on the property and take it as
collateral. Those that support Although you have been long
sub-prime lending, on the other looking forward to the day when
hand, maintain that these lenders you could buy your dream home, it
are helping individuals buy homes is better to work toward
that would otherwise be unable to rebuilding your credit so you can
make such a purchase. qualify for a traditional loan.
In many cases, you can
Should I Take Out a Sub-Prime re-establish your credit in as
Loan if My Credit is Bad? little as one year by making
payments regularly and on time
Taking out a sub-prime loan is toward your other debts. Using a
risky and very costly. Since you credit card and paying it off in
will have to pay a higher full at the end of each billing
interest rate than normal, you cycle is one of the best ways to
will ultimately lose thousands of accomplish this, just be sure the
dollars in interest payments that card reports to the major credit
could have been avoided if you reporting bureaus.
had waited to buy your real
estate at a better rate. Whether you think sub-prime
lending is predatory or not, it
Since you will be paying so much is a poor financial move to make.
in interest when you buy a home Hold off on your purchase and you
with a sub-prime loan, you will will put yourself in a far better
also be putting yourself in a bad financial position for the
financial situation. If you are future."
unable to repay the loan in a
timely fashion, your home can be
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About the Author:
Kinan Beck is the Broker and co-owner of One Source Realty in Austin Texas. Visit Kinan’s Austin Texas Real Estate Guide, visit his Austin real estate website.
