In the past decade, China's financial industry has developed rapidly, and the loan industry has also been reformed. Many businesses and regulations have been revised. Many users want to know about subprime loans. Today, we will briefly introduce subprime loans.

I. Five-level classification of loans

To understand subprime loans, we must first understand the five-level classification of loans. This is the bank's classification of loan quality according to the borrower's repayment ability, which is mainly divided into normal, concerned, secondary, suspicious and loss, of which the last three are non-performing loans.

Development history of five-level classification:

Before 1998, loans were mainly divided into normal loans, overdue loans, sluggish loans and non-performing loans according to the financial system of financial and insurance enterprises, which was similar to the current classification, more in line with the situation at that time, simple and practical. However, with the development of the financial industry, disadvantages have also emerged. For example, as long as it is not due, it is a normal loan, which is actually based on the borrower's income, operation and financial situation. There is also overdue 1 day, overdue for 50 days, which are overdue and cannot reflect its severity. In short, the reform of loan classification is imperative.

1in may, 1998, the people's bank of China formulated the guiding principles for loan classification with reference to international practices and combined with China's national conditions, and the new classification standards were also formulated according to this provision.

II. Interpretation of Subprime Loan Terms

There are obvious problems in the borrower's repayment ability, and it is impossible to repay the loan principal and interest in full by relying entirely on its normal operating income. Interest needs to be repaid by disposing of assets, financing from outside and even implementing mortgage guarantee.