What is a characteristic of loans categorized as prime loans?

Prime loans are characterized by favorable borrowing conditions primarily extended to borrowers with good credit histories. A key aspect of prime loans is that they typically have lower interest rates and more flexible repayment terms compared to subprime loans, which target less creditworthy borrowers.

The focus on borrower eligibility means that institutions lending prime loans are looking for individuals who demonstrate responsible financial behavior, often evidenced by low debt-to-income ratios. This indicates that the borrower has a manageable level of debt in relation to their income, suggesting a lower risk to lenders when providing such loans. As a result, borrowers who qualify for prime loans often benefit from more competitive terms and rates, making this characteristic a defining factor of prime loans.