Glossary
Glossary of terms and acronyms related to Australian banking, finance and investments.
Sub-prime lending
Sub-prime lending refers to loans that do not meet the standard banking criteria for lending. Also called non-conforming loans, they are usually offered to people who are risky borrowers, such as those with poor credit, no steady income, insufficient documentation, and an unusual reason for borrowing. To compensate for the risk, sub-prime lending has a higher interest rate and less flexibility than standard loans. Some of the features commonly sacrificed are redraw facility, mortgage offset, and introductory rates. Early repayment may also be restricted; some lenders charge a penalty for making additional repayments.
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