Subprime Rates Definition

The interest rate charged to subprime borrowers is colloquially referred to as the subprime rate. There is no rigid definition of what constitutes a subprime rate, other than it is higher or much higher than the conventional rate. Subprime mortgage rates usually run 2-3%, or more, above conventional mortgage rates while subprime rates on smaller loans often run as high as a 400% annualized rate. Most subprime loans are for a shorter duration than conventional loans, carry numerous fees, and bear prepayment penalties.