Money that a person borrows under a bona fide loan agreement is not income. Money received as repayment of the principal of a bona fide loan is not income. A bona fide agreement is an agreement that is legally valid and made in good faith.

If a loan is not bona fide, the cash provided by the lender is the borrower’s unearned income in the month received. If a loan is not bona fide, payments towards the principal are unearned income to the lender.

Interest received on money loaned is income whether the loan is bona fide or not. (See SI 00830.500C.)

Items bought on credit are not income because they are treated as though the individual were borrowing money to pay for the item.

Food and/or shelter provided by members of the household where the beneficiary lives, or by someone outside the household, is not income (ISM) if repayment is required under the terms of a bona fide loan. (See SI 00835.482)