HomeFinanceNo-Income Loans; What are they and How do they Work? 

No-Income Loans; What are they and How do they Work? 

No-income loans, as the name suggests, are designed for people who do not have a full-time job source. However, they are for people who have enough income sources to repay the loan. They can also have liquid assets. 

No income loans are also known as an alternate, alternative income verification, and bank statement loans. 

To make it easier to understand briefly; if you don’t work but you receive a fixed amount of payment per month from a trust or due to liquid assets, you can apply for no income loans. On the contrary, if you want to apply for this specific loan but you are planning to buy a house, then you will have to specifically apply for a no-income mortgage. Likewise, for the mortgage, your assets and other income sources are verified first. 

How Does No Income Loan Work?

The functioning of these loans is almost similar to that of your regular loans. The major difference remains that your full-time job income source is not required for this loan. You only need an alternative payment method of repaying the loan to the authorities. And your sources are verified before granting the loan to you. 

The most important aspect of no-income loans is your financial stability. The more financially stable you are, the faster you can get this type of loan. The lender or financial institutes must feel confident about your ability to pay them back. 

There are various sources of liquid assets that can be used to prove your repayment ability to the lender. Some of them are:

  • A property 
  • Real estate 
  • Government bonds
  • Appraised valuables 
  • Vehicles 

Likewise, side income sources that can be used to apply for no-income loans are:

  • Alimony 
  • Partner income
  • Self-employment income
  • Pension
  • Side gigs
  • Business startup 
  • Child support

The biggest dilemma in this type of loan is that lenders require detailed verification and it can take some time for approval. Lenders always find themselves at potential risk. And therefore, they set up some specific terms that aren’t very friendly for people (in some cases). 

Types of No-Income Loans:

If you are planning to get a no-income loan, then you must know its types. There are 4 basic types of no-income loans:

  • No job, no income, no assets 
  • Verified assets, stated income
  • No income, verified assets 
  • No income, no assets 

Before applying for any of the following, make sure that you understand them accurately. You must consider the resources you have and evaluate your repayment abilities, yourself. Weigh out other options as well, before applying for the loan directly. Remember, a no-income loan can cost you a lot more in the long run. Thus, you must assess your personal situation, and resources and acknowledge the types and how they work before making a decision. 

Drawbacks of No-Income Loans:

There are some very evident drawbacks of no-income loans and they must be considered before applying for it too. 

  • Repayment terms are set for months and not for years. You will have to repay the loan back within a few months. 
  • The interest rates are higher than regular loans. 
  • The fees for no-income loans are also quite high. 
  • Low loan amounts. 

Depending on the assets you have, these drawbacks might or might not impact you negatively. 

Are There Any Alternatives for No-Income Loans?

Applying for a loan when you do not have a steady income source can be complicated. This is one of the major reasons why people tend to opt for no-income loans, in the first place. However, there are some alternatives that one might consider:

  • The easiest way to get a loan is to ask a friend or a colleague or a family member to help you out. You can set out the terms with them and pay them back in the stated timeline. This does get a bit hard as people would definitely consider your paying back ability as well. But you can give it a try.
  • You can look for small loans online as well. There are several community funds too that help you during a financial crisis. 


No-income loans are certainly a quick way to get a loan if you have no steady source of income. As most loans require a full-time job certificate for approval, this does become an issue for people who do not have one. 

However, no-income loans are not as easy as they might seem. The complications do come along. Thus, it is recommended that you study and understand these loans before applying. Assess your situation and opt for them if extremely necessary. If you can, you can consider the alternatives as well. Otherwise, create a repayment plan before applying for the loan and stick to it religiously until the loan is paid back. 

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