18th Nov 2009 by JonB
a subordinated loan is a loan that is in position behind another loan. This means that, in the even of a default, a subordinated loan will be paid off only when the loan in first position is paid off completely. The most common form of subordinated loan is a second mortgage. Called a second because it is in second position behind the first. Typically, subordinated loans are for much smaller amounts and carry much higher interest rates. Seconds, thirds, HELOCS are all examples of subordinated loans.
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