Have you ever heard of a NINJA loan? No income, no job, no asset loans — known as NINJA loans — are highly predatory loans that contributed to the 2008 recession. However, countless influencers are flaunting this loan product as a great way to get Airbnb businesses off the ground.
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GOBankingRates will explore “Your Rich BFF” Vivian Tu’s stance on this strategy and why it’s the “worst finance advice” she’s ever seen. This article will cover the dangers of NINJA loans, the issues with cash advances and the problem with banking your financial success on Airbnb.
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The Dangers of NINJA Loans
NINJA loans give borrowers access to funds despite having no proven way to repay the amount. Lenders do little due diligence to verify your credit, income or assets. These loans were extremely popular before the 2008 financial crisis, making them one of the top contributing factors. Borrowers took out funds they couldn’t repay, resulting in high default levels.
To avoid another financial crisis like 2008, the Dodd-Frank Act placed stricter regulations surrounding NINJA loans. For one, if someone is offering a NINJA loan, look into the terms. If the lender isn’t credible, you could end up in financial trouble. Second, if you don’t have any income, the likelihood of repaying the loan according to the terms is low, which can ruin your credit and lendability.
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The Issues with Cash Advances
Cash advances are another predatory loan option. Credit card companies allow you to take cash advances with a higher interest rate, usually between 20% and 30%. Like a NINJA loan, if you don’t have steady income to repay the loan, your credit score and future lendability could suffer.
Even if a credit card company offers a 0% APR for an introductory period, there’s no guarantee that you will be able to afford the loan once this promotion ends. Credit card debt is one of the top contributors to bankruptcy filings. It’s best to avoid taking out debt you might not be able to repay.
The Problem with Banking Financial Success on Airbnb
Airbnb has been all the rage lately, with influencers telling you how they quit their jobs from just one property. What these influencers don’t tell you is that operating an Airbnb is money and time-intensive. There’s no guarantee that your Airbnb listing will do well.
Instead of banking your success and ability to repay cash advances and NINJA loans on an Airbnb property, look for more stable income streams. A regular W-2 job is nothing to be ashamed of. It can provide you with the stability and security you need to set a strong financial foundation.
The Bottom Line
Avoid these predatory strategies if you’re just graduating from college and looking for what’s next. While they may have worked for one person, there’s no guarantee that starting an Airbnb business using NINJA loans and cash advances will be successful for you.
Instead, stick to the basics. Find a stable job, track your finances and invest for your future.
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TikTok, “DON’T fall for this money TRAP!!“
This article originally appeared on GOBankingRates.com: ‘Your Rich BFF’ Vivian Tu: This Is the ‘Worst Finance Advice I’ve Ever Seen’
