TN 3 (05-03)
Proceeds of a loan are not income to the borrower because of the borrower's obligation
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)
Interest income, SI 0830.500C
Loans of in-kind support and maintenance, SI 00835.482
Determining whether a cash loan is bona fide, SI 01120.220
Promissory notes and property agreements, SI 01140.300.