A subprime lender is someone who lends money to folks that cannot meet all the requirements for a more conventional loan. The term "subprime" does not refer to the rate the person is paying for the loan, but to qualifications of the borrower. A subprime borrower would be someone who cannot provide full documentation, has a short work history or simply would not qualify for a loan when full documentation is required.

The problem with subprime lenders is that they allow folks to borrow money that they are often ill equipped to pay back. In some cases, borrowers have been allowed to skip even the most basic requirements and purchase millions of dollars worth of real estate, with no money down and when they had NO INCOME. This has led to a great deal of concern as many of these loans end up in foreclosure.