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Basically, subprime loans are creative ways to convenience someone that they can afford more than they should.
Listed below are just some examples of subprime loans.
1. Fixed Rate Mortgage (FRM). A FRM has a fixed rate mortgage but the borrower usually has a much higher interest rate than a person with good credit.
2. Adjustable Rate Mortgages (ARM). As the interest rate varies, so does a borrowers monthly payment.
3. Hybrid ARM. This is typically a FRM for x number of years at a fixed rate, and then it changes to an ARM. 2/28 is a very common term for this type of loan.
4. Negatively Amortizing Mortgages (NegAms)...
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