Will Subprime Auto Loans be The Next “Big Short”?

But, what about subprime auto loans? Subprime auto loan is a type of auto loan which allows people with poor credit rating (below 620 according to Fair, Isaac, and Company / FICO), or people that have poor financial ability to pay back their loans to perform an auto loan. This type of loan also carries an interest rate which is higher than the interest rate that is given to the prime borrowers, or people who have a good financial ability to pay back their loans to compensate the subprime borrowers’ higher probability of risk. Can this subprime auto loan really mess up The States’ economic system? When the numbers of car loans, including subprime car loans are increasing steadily, we should be concerned about it. The graph shown below, which The Fed released, shows us how auto loans are increasing, even exceeding $1 trillion at the end of 2015.