Subprime vs. Predatory Lending

As a community development scholar-practitioner, I’m compelled to remind us of the difference between these forms of lending: a subprime loan is the product for households without access to mainstream credit.  Provided by knowledgeable (sp??), trained lenders (such as community development financial institutions) with fair terms and additional services such as homeownership counseling, subprime loans can be an important stepping stone to building good credit and asset accumulation for households, often low-income and/or of color. 

Predatory lending, on the other hand, is a distinctive type of subprime lending with rapacious terms and fees that willfully preys on borrowers that lack the same access to and information about credit products.  It disproportionately targets communities of color of all incomes, where the access issue is key, as well as the elderly, where information about lending products is likely the bigger opening for predatory lending.  Obviously, these target populations are not mutually exclusive, and many of us can probably relate to the problem of having sophisticated consumer knowledge and motivation to shrewdly navigate the lending process.  The point of predatory lending is to strip equity from homes and neighborhoods, not increase it.

I’m bringing this up as two of the mainstream blogs I read, Feministing and Pandagon, go after the subprime lending issue in minority neighborhoods.  I’m also linking again to a fairly wonkish piece I wrote in March clarifying these types of lending. 


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