What is a Ninja Loan?

Tricia Christensen
Tricia Christensen

The Ninja loan is a loose acronym from No Income, No Job, No Assets, and the term also represents something of a play on words. Due to the fact that a ninja loan is likely to be defaulted upon, the borrower is described as like a ninja because he or she can so easily disappear, especially when it comes to making payments. Use of the ninja loan is highly criticized as a dangerous lending practice and can be in part held responsible for the subprime mortgage crisis of 2007 and the collapse of financial markets in 2008.

NINJA loans were loaned at subprime rates.
NINJA loans were loaned at subprime rates.

In a scenario where a ninja loan is offered, and they are becoming considerably less common since the economic downturn of 2008, the borrower really has few means to pay back money owed, but on applications these loans may have “looked” okay. Truly what happened with many ninja loan was that either borrowers or brokers purposefully falsified information about jobs, income or assets. Alternately lenders merely took the word of applicants without verifying their information. The fault was not only on the side of applicants, many of whom submitted true applications but also on the lenders who approved loans in a reckless fashion.

Moreover, many ninja loan types were sold to companies like Fannie Mae and Freddie Mac, which significantly contributed to the mortgage crisis, and some were part of collateralized debt obligations that were invested in by people from companies like Bear Sterns, AIG and Lehman brothers. Though the NINJA loan alone can’t be held solely responsible for collapse of economic markets and the housing industry, which has resonated through much of the world, it was certainly one lending practice that created huge problems and shined light on irresponsible actions on the part of lenders.

In light of this crisis though, some companies have created NINJA loans to help bail out other companies in trouble. This was one intent of the huge economic bailout packaged passed in late 2008 in the US. Other lenders have responded to the crisis by exerting extreme caution, which means double-checking all information submitted by loan applicants and raising requirements for things like “good” credit scores.

One of the reasons that NINJA loans became popular was because they were loaned at a subprime rate. This meant borrowers would pay far more interest to pay back loans, which could have added significant profit to lenders. Instead, though, lenders did not profit by lack of proper screening of applicants, and they loaned money to people who were in no position to repay loans. History may someday view the NINJA loan as one of the least responsible acts of the lending industry in the late 20th and early 21st century.

Tricia Christensen
Tricia Christensen

Tricia has a Literature degree from Sonoma State University and has been a frequent wiseGEEK contributor for many years. She is especially passionate about reading and writing, although her other interests include medicine, art, film, history, politics, ethics, and religion. Tricia lives in Northern California and is currently working on her first novel.

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Discussion Comments


A co-worker of mine got caught up in that subprime loan scandal back in 2004. He didn't call it a NINJA loan, but he said everybody involved in the process knew he didn't earn very much money, and he only had a used car as collateral. They changed some of the numbers on the loan application and it was approved for the full amount. I helped his family move into a really nice four bedroom home in a nice part of town. At the time, I was even a little jealous.

Since his wife also worked full-time, they had enough money to repair the loan for a year or so. But he got laid off when the economy tanked in 2008, and they fell way behind on the mortgage. They finally had to declare personal bankruptcy in order to get out from under a NINJA loan they couldn't afford in the first place.


I can't believe a lending scheme of this size even worked. Whenever I tried to get a personal bank loan to buy a car or make some home repairs, the bank gave me a four page application booklet and told me I had to have proof of all income and current debts. They still turned me down because of my credit score. I can't believe these lenders would finance a loan to buy something as big as a house.

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