Sub-prime lending extends credit to people who do not have access to the regular credit market.
It could take the following forms:
- Loans to borrowers who have an existing history of loan delinquency or default
- Loans to borrowers already bankrupt
- Loans that do not meet guidelines stipulated by Fannie Mae or Freddie Mac
- Loans based on property that cannot be sold on the primary market
Such borrowers who obtain funding on a sub-prime basis are termed as sub-prime borrowers.