What do you mean by no-income loans?

A no-income loan is considered a loan offered by lenders to unemployed customers. These loans need liquid assets or another source of income through which you can pay the loan amount. The lender is needed to verify the sources through which you make repayment.

There are various alternative names for no income loans such as no-doc loans, alternate-income loans, bank statement loans, etc.

For example, if you are not working because you get the monthly income from a trust that the grandparents set up for you, it is considered the alternative source of income.

A way no-income loans works

No-income loans works are identical to other types of loans. No-income loans need that you have some other options for repayment of the loan along with interest. Moreover, the lenders will check proof of liquid assets, credit records, and a bank account that helps determine your ability to repay the loan amount.

Lenders check your credit history, assets, finance, or payout from other sources to analyze the level of risk that you show to the company if they approve your loan. If they are prepared and confident towards you, then they will accept the loan request.

You can use several types of cash-equivalent or liquid assets, alternative income resources, and monetary compensation to make payments. There are some assets that include:

  • A vehicle
  • A real estate or house
  • Government bonds
  • Appraised valuables

There are several types of income that you can use:

  • Royalty payments
  • Unemployment benefits
  • Income of the partner
  • Alimony
  • Tip income
  • Child support
  • Retirement account
  • Investment income and dividend payments

If the lender knows that you will repay the loan, then they think there will be chances of risk. You have to pay extra costs for the risk the lender is taking for you.

Additionally, no-income loans have some demerits as follows:

  1. Higher interest rates
  2. Higher fees
  3. Monthly installments of the loan instead of yearly
  4. Lower loan amount even if you have a co-signer

Different types of no-income loans

There are various types of no-income loans that can understand firstly, such as:

  • Stated income, verified assets loan(SIVA)

A Siva loan is considered a loan approved for those individuals who have low income that is not sufficient for a loan. But they have some assets used as collateral to a lender for loan approval.

  • No income, verified assets(NIVA)

The NIVA loan applies to those people who do not have an alternative or traditional income. It also needs the assets appraised for value and placed as collateral before the loan approval.