How knowing your credit score can help protect you from a subprime loan.
Subprime borrowers have lower credit scores than prime borrowers, and financial institutions worry they'll be at higher risk of defaulting on their payments. As a result, banks typically charge subprime borrowers higher interest rates and sometimes additional fees.
"For example, subprime marketplace lenders can charge upwards of 30% for a personal loan," Triggs says, noting that consumers with low credit scores are often taken advantage of due to their financial circumstances. "Obtaining loans such as these could put struggling consumers into a much deeper hole than they were prior to obtaining the subprime loan."
There are steps subprime borrowers can take to protect themselves from subprime loans, including brushing up on their financial education and reading the fine print.One of the best ways a consumer can protect themselves from high-risk loans and credit cards is by knowing their credit score., ranging from deep subprime to super-prime.
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