second chance loan meaning

• [Finance]
  A type of loan associated with subprime lending and borrowers with a tainted credit history. Second chance loans offer a borrower a chance to rebuild their credit history. Although subprime loans might have a typical term-to-maturity (30 years of a mortgage), they are usually intended to be short-term financing vehicles that allow the borrower to repair their credit history to the point where they can refinance into more favorable loan terms. Borrowers must compensate the lender for taking on more risk in lending to them by paying a higher interest rate, thus the incentive for the borrower to refinance as soon as they are able.