A bad credit loan, to my way of thinking, is the same as a risky loan. For example, you lone money to a friend who says he will pay it back by a certain date and he fails to do so. In fact, he never pays you back. He just never has the money to do so.
When a bank loans money to a prospective house buyer, and the buyer defaults because he cannot repay the loan and the interest on that loan, the bank usually reclaims the home itself. Then it can on sell it to someone else.
But what if the loan made was, say $200,000, the man defaults, and the bank reposses the home, but can only sell it to someone else at $100,000. Then I guess I'd call this a bad credit loan. And I right?