What is a Sub Prime Loan?

A sub prime loan is a loan made to a customer who is below (sub) the preferred (prime) borrower in terms of income and credit score. Many of these borrowers are capable of making their monthly payments, so long as their payments remain steady. However, in the months leading up to the recession which began in the fall of 2008, interest rates fluctuated wildly as the cost of living rose and larger house payments, combines with enormous hidden fees, made sub-prime borrowers unable to make their monthly payments.