Subprime lending has become a very important aspect for any financial market in the world. The term “Subprime" refers to any kind of lending that is spaced out from the usual lending terms and conditions. Subprime lending does not take place only in mortgages it has started to take up the auto loan market too. In UK today Subprime lending takes place whenever the borrower's credit status is less than perfect; that is if an individuals credit history is at stake then Subprime lending takes place.
Subprime auto loans offer various types of interest rates; one type is called interest only lending where the borrower pays interest on the loan for the first few years; then the borrowers have another option of picking a fixed monthly payment and lastly they have the option of choosing fixed rates for the first few years and then when that period expires the rate falls back to variable rates.
Whenever there is a Subprime auto loan, then the interest rate applicable is very high, much higher than the usual market rate; this takes place as much is at risk for the lender. It must be taken into consideration that it is these Subprime lending's that has lead to a number of weak credit histories that include payment delinquencies, and possibly more severe problems such as charge-offs, judgments, and bankruptcies.
Subprime lending is also known by another name that is it is called second charge lending. If the borrower fails to make payments then at times the lender cannot claim for anything as they only have a second charge. There are numerous cases in UK where people have taken Subprime auto loans after which the borrowers fail to make their payments and then the lenders in turn have been unable to re-posses the cars due too the Subprime nature of the terms and conditions of the lending.
Carney Alden is a Masters in Accounting and Financial Management from Lancaster University Management School. Having completed his Masters in Finance from Derby University. He provides useful advice through his articles that have been found very useful. To find new car loans , used car loans, instant car loans visit http://www.capitalcarloans.com .