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Definition of 'NINJA Loan'
A slang term for a loan extended to a borrower with "no income, no job and no assets". Whereas most lenders require the borrower to show a stable stream of income or sufficient collateral, a NINJA loan ignores the verification process.
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Investopedia explains 'NINJA Loan'
A NINJA loan is considered to be a type of subprime lending, often found in the mortgage market. While the specifics of any NINJA loan can change, most offer the lender a low initial rate, which is then increased after a few periods of payment. The borrower is hoping for the value of their property to appreciate significantly, allowing them to repay the loan with the newly found equity. However, when the property doesn't appreciate, many borrowers cannot make the repayment. This makes the NINJA loan a very risky proposition for lenders.
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