A low doc loan has become a lifeline for borrowers everywhere. It’s a type of loan that requires less paperwork which is ideal for those who are self-employed or run a small business. Low documentation loans are pretty straightforward and work very closely to traditional bank loans – with a few exceptions. So, what things do you need to know about a low documentation loan?
Your Credit History is Important
Just because you’re applying for a low doc loan, it doesn’t mean the lender won’t be cautious. For instance, most lenders will take a very close look at your credit history and score. They will look at your loan history and whether you have any defaults or late payments. These things matter to lenders because they may determine your interest rate and eligibility also.
Eligibility Can Vary
You might be self-employed, but that doesn’t mean to say you won’t be eligible for a standard bank loan. It comes down to your employment status. For example, if you have short-term contracts or are a casual worker, you are more likely to require low doc loans. It can vary based on your personal circumstances and work history. It’s important to speak to a lender and find out where you stand before applying for any loan.
Some Interest Rates May Be Higher Than Traditional Loans
It’s important to understand that some low doc loans come with higher rates of interest. This is down to you being classed as a high-risk borrower. However, interest can vary depending on your personal circumstances. For example, you have excellent credit and earn a steady income each month. You might find the interest rates are set at a slightly lower rate. This also depends on the lender. That is why a low doc loan can be incredibly popular today.
You’ll Need Documentation to Back Your Application
A lot of people confused low doc loans with zero documentation loans. It’s an easy mistake to make, however, you will need to show some documentation to obtain the loan. For instance, lenders require you to verify your income through a declaration form. This basically gives the lender an estimate of how much you earn and whatever assets you have. It shows how you’ll repay the loan. Every lender has criteria to meet, but you’ll likely require the following:
- GST Registration Proof
- Previous Tax Returns
- BAS
- Business Bank Statements
- ABN – Australian Business Number
Of course, these will vary according to the lender chosen.
Low Doc Loans are Easily Available
Banks and other lenders have become a little more flexible in recent years, but few offer low documentation loans. Fortunately, specialist lenders are becoming easily available and that’s crucial. It means you have the opportunity to find a low doc loan that suits your needs and personal financial situation too.
A Simple Way to Borrow Money
A lot of people are wary when it comes to borrowing money, and low documentation loans are still fairly new to the market. It’s easy to be unsure about these loans because there are a lot of misconceptions surrounding them. However, low documentation loans can be extremely viable for millions across the country. Low doc loans can be great, and they do offer great flexibility too.
