What is a NINJA Loan?

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Unlike most conventional loans, a NINJA loan is typically a type of loan that is given out to a borrower without the lender’s attempt to verify the eligibility and capability of the borrower to repay the loan.

What is a NINJA Loan?

A NINJA loan is an acronym for No Income, No Job, and No Assets Loan. This type of loan does not require borrowers to provide substantial proof of their income threshold and assets that confirms their eligibility for the loan.

NINJA loans gained popularity in the mortgage industry prior to the 2008 financial crisis, which resulted in the passing of new laws and standard rules for taking out loans. Ever since laws have been put in place, NINJA loans have been more difficult to obtain.

This article aims to provide in-depth information on NINJA loans, ranging from the loan framework to advantages and disadvantages.

How Does a NINJA Loan Work?

Most conventional loans take the evaluation of their borrowers seriously. Since the process of getting loans from traditional programs is often intense and lengthy, a lot of institutions have begun to find ways to offer loans in a less complex and faster way. The easy process of offering a loan without reviewing the borrower’s financial capacity was employed by NINJA loans.

• Borrowers must meet the credit score requirement

Under the NINJA loan framework, borrowers are expected to meet a specific credit score before the loan can be approved. The lender will offer the loan based on the borrower’s credit score without going through the process of verifying the borrower’s income or assets. The only thing required of the borrower is to meet the credit score specified by the lender in order to be considered eligible for the loan.

• Initial terms

Part of the framework for NINJA loans also included initial terms that make the loan offer deceptive. There is an inclusion of a “teaser” rate, which makes the borrower easily attracted to the offer. In the long run, the interest rate would increase, which could pose a significant risk to the borrower. In most cases, borrowers find it difficult to pay back the interest accrued on their loan.

• Loan repayment

Moreover, just like conventional loan programs, NINJA loans also feature loan repayment. Here, there is an agreement on the payment schedule between the lender and borrower. The loans offered by NINJA are required to be paid within a specific timeframe.

If a borrower defaults, the lending institution has the right to take legal action against him or her to recoup the remaining balance. Borrowers who fail to repay their loan as soon as it is due will face serious penalties, which may affect the individual’s ability to receive loans from other lending institutions.

Aside from facing penalties, the lending institution can decide to seize some of your assets until you repay your loan. If you’re still unable to pay, those assets will be put up for sale to get back the loan amount the borrower failed to pay.

Advantages of NINJA Loans

Just like every loan opportunity that offers peace of mind for emergency situations, NINJA loans offer a variety of benefits to borrowers. Some of the advantages of NINJA loans include the following:.

• No paperwork is required

Due to the fact that the only requirement for obtaining a NINJA loan is the verification of the borrower’s credit score, the application process is relatively easy. Unlike traditional loan applications, NINJA loans were easy to approve and process. It features a quick and convenient application process, which makes it appealing to some individuals. If you do not have paperwork, a NINJA loan will get you covered.

• Fast approval and funding

A NINJA loan does not involve a lengthy or complex process; hence, the loan process is quick and borrowers receive funds fast. The only thing required is your credit score; the lending institution will not review tax returns, pay stubs, or bank statements. So, you are guaranteed an easy and fast payment.

• Credit access to those who do not qualify for conventional loans

Because most conventional and traditional banks will not grant access to loans without accessing borrowers creditworthiness, a NINJA loan was also meant to bridge the gap. They offer credit to individuals who do not qualify for conventional loans. By doing this, borrowers are able to purchase assets that would help improve their standard of living.

Disadvantages of NINJA Loans

While NINJA loans offer benefits to borrowers, it is important to also consider their disadvantages. Highlighted below are some of the disadvantages of NINJA loans:

• Exposure to risks

Most often than not, NINJA loans expose the borrower and lender to a wide range of risks that can ultimately cause financial problems.

Because NINJA loans do not require documentation of assets to be used as collateral, the lender stands to lose a lot if the borrower fails to repay the loan. This denotes that, if the borrower defaults, the lender will not be able to seize any assets to cover the losses.

On the borrower’s side, you will be tempted to borrow above your capacity in order to settle the loan. Research has shown that individuals often take out loans that are greater than what they would originally qualify for at a traditional bank.

• Deceptive in nature

We all know NINJA loans does not have a credible and standardized process for approving loan, which can make it easy for borrowers to be exploited. Due to the fact that it offers easy loan options, individuals can be cheated on without even knowing it.

Over the years, NINJA loans have created numerous issues in the credit market, ultimately causing the eventual collapse of the global economy.

Alternatives to NINJA loans

Now that NINJA loan have become less popular in most states, there are other loan options you can utilize. One of the alternatives to a NINJA loan is a Qualified Mortgage. While this type of loan requires income and asset verification, it does not have underlying policies that could bring harm to the borrower.

You can also consider FHA loans, conventional mortgages, or mortgage preapprovals as alternatives to NINJA loans. These are excellent options for those who seek a loan that offers peace of mind and fast funding.


Why was NINJA loan designed?

Typically, NINJA loans were designed for those who had difficulty providing paperwork that could verify their income and assets.

Before the financial crisis, a lot of banks were exploiting borrowers who were not financially literate enough to understand the loan terms they were offered. Hence, NINJA loans became accessible, even if you don’t have the documentation required to approve a loan.

Are Ninja Loans Still Available?

Unfortunately, NINJA loans have long ceased to exist in so many states, like the U.S. The reason is that there are now strict standards that guide loan approval. You can’t just take out a loan without the necessary documentation.