Question

Subprime lending means lending to borrowers and charging interest that is below the current prime interest rate.

Answer 1

Answer:

False

Explanation:

Subprime lending means lending to borrowers and charging interest that is above the current prime interest rate.

The current prime interest refers to the rate offered to the best credit rated customers based on their credit history. This rate is lower as it is meant to be an attraction for the customers who are good credit payers and takers.

The sub-prime lending refers to giving loans at a rate higher than current prime interest rate to the borrowers who are lower on credit rating. This lending takes on higher risk and hence thereby charges higher interest from the borrowers.