subprime lending

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The provision of loans (especially home loans) to borrowers with a poor credit rating. Because such loans are considered high risk, the costs of borrowing are also higher. Reckless subprime lending by US financial institutions, compounded by the securitization of these loans in high-risk off-balance-sheet instruments, precipitated the financial and banking crisis of 2008. See toxic assets.

Subjects: Financial Institutions and Services — Accounting.

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