A subprime crisis is a financial crisis that occurs when there is a widespread default on subprime loans. Subprime loans are loans made to borrowers with poor credit histories and low credit scores. These loans often have high interest rates and fees, and they can be very risky for borrowers. When a large number of subprime borrowers default on their loans, it can lead to a subprime crisis.
There are a number of things that can be done to avoid a subprime crisis. One important step is to ensure that borrowers have the ability to repay their loans. This means that lenders should carefully assess borrowers’ credit histories and debt-to-income ratios before approving loans. Lenders should also make sure that borrowers understand the terms of their loans and the risks involved.
