Prime vs. Subprime

If you borrow money, you (and the type of loan you receive) may be categorized as prime or subprime.

Subprime is a term used to describe the types of credit and interest rates offered to consumers with low credit scores, damaged credit, or no credit. Subprime credit cards, mortgages, and loans typically require security deposits, annual or application fees, and/or higher interest rates. Consumers who apply for subprime credit offers have typically had credit problems in their past or lack a credit history altogether. They represent a higher risk to the creditor.

Prime is a term that describes the credit granted to consumers with good or excellent credit. Prime credit cards, mortgages, and loans usually do not require security deposits and they often have lower (or no) application fees, carry lower interest rates, and offer rewards programs and other benefits.