What type of loans are designed for borrowers with poor credit, unstable income, or high debt ratios?

Subprime loans are specifically designed to cater to borrowers who may not qualify for traditional financing due to issues such as poor credit history, unstable income, or high debt ratios. These loans typically carry higher interest rates to compensate for the increased risk the lender is taking on.

Borrowers who fall into the subprime category often face challenges in obtaining conventional loans, which generally require a favorable credit score, steady income, and manageable debt levels as part of their underwriting criteria. As a result, subprime loans provide an alternative financing option that enables individuals with less-than-ideal financial profiles to access funds for home purchases or refinancing.

In contrast, secured loans involve collateral and are not specifically aimed at those with poor credit. Fixed-rate loans refer to a specific loan format that maintains the same interest rate for the entire loan term, which is applicable to various borrower profiles and not limited to those with credit challenges. Overall, subprime loans serve a unique purpose in the lending landscape by providing opportunities for those who would otherwise struggle to obtain financing.