When someone goes to a bank or to any financial institution for a loan his credibility and financial strengths are reviewed. Based on his financial status he would be rated. A customer who is very credit worthy and has a consistent cash flow with which he can meet out his loan obligations is termed as a "PRIME" customer and such a loan would be termed as a Prime Loan.
On the other hand when the credit worthiness of the customer is not too good and he is not in a strong financial status he is termed as a "Sub Prime" Customer. When banks disburse loans to such customers, it is termed as a "Sub Prime Loan"
Usually the rate of interest charged by banks to sub prime customers is very high in comparison to Prime customers.
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