Subprime Auto Loan

See: Subprime. See: Seller Financing.

Risky. When you have a borrower who has lousy or no credit, who doesn't make enough money to comfortably pay for the new V8 with a Hemi Engine and the SuperBlaster stereo, they're asking for a subprime auto loan. When you think "prime," you think..."rib" first, of course. But then you think: low risk. High-quality credit. "Safe." Subprime is the opposite.

When you're a subprime candidate, just out of college, having handed the family great shame in majoring in English, and you want to borrow $18,893 from Smilin' Sam's Auto Dealership, you're going to pay big interest rates. If prime rate is 3%, you'll pay like...15% or more interest. That's almost 3 grand just in interest per year for that new-ish truck.

Why so much? Risk. You're a bad one. Odds that you get fired from your magazine sales job are high. You're barely employable. So anyone lending money to you will think at least twice about doing so, and when they do, they'll charge you big. In part, because a high percentage of borrowers will just default, disappear, or not pay in various and nefarious ways. And the payments of those who actually pay back the money they promised to pay back have to pay for all the deadbeats who absconded.

Yeah, that's how the world works. But really...if you were lending to you, wouldn't you charge you a lot? Hello.