Yes, there's a greater risk of loan default, but rates are much higher to compensate, and will provide a much higher net yield to you. (goodfinancialcents.com)
There is no unique way of calculating a real interest rate because different borrowers pay different real costs of borrowing, depending on the term and degree of risk of the loan. (rba.gov.au)
Normal subprime lenders have employed much higher interest rates in order to compensate for the increased risk of the loan. (fha.mortgageloanplace.com)