What are Low Doc Loans?

Buying a property or a vehicle is not an easy task these days as it requires you to have a large amount of investment and capital. The majority of purchasers would prefer for applying for a loan as it will help them in properly financing the entire transaction. However, in some cases there are certain individuals such as casual and self employed workers who cannot apply for conventional loans as they do not possess the required ability or qualifications to clear the credit checks that the lenders carry out.

To cater to the needs of such individuals, low documentation loans or low doc loans are designed in such a way that self employed and casual employees can apply for loans which they would not be eligible for in traditional methods. In this case the usual process for application is carried out, though the submission of necessary documents including the proof of income, assets, liabilities and other are not required, due to the fact that no verification is carried out on the submitted paperwork. This is even good for individuals with a bad credit history.  

Basically there are three categories of low doc loans:

• Self Income Loan


• Account Statement Loan


• Asset Lend Loan

In the self income type of loan all the individual needs is a declaration of income to qualify. With no verification, the loan amount could cover up to 80% of the property cost, though at a higher rate of interest. Next is the account statement type. This requires certain amount evidence of income to be provided. Finally, we have the asset lend loan. In this system no evidence is required as the loan is secured by the cost of asset that is being loaned. The downside to this is that the interest rates are quite high.    

Due to the financial crisis taking place all around the world these days, a number of institutions are increasing the requirements for safety purposes. Most companies now also ask for business activity statements (BAS) as a part of the documents required. This BAS is basically a tax report which displays your obligations and entitlements. This is a must for self employed individuals looking for such loans.

Low doc loans are known to finance up to 80% of the property amount which you are looking to purchase. However, with the financial crunch that is affecting Australia, these days lenders only prefer to provide 60% of coverage. However, with the additional documents that you provide, loan institutions can provide more coverage. The more money that you borrow the higher will be the amount of repayment. A number of additional charges are also there, so one should gauge their repayment capacities before going for such options.

These loan options are quite beneficial also as they can fulfill your financial requirements. A financial deal should always be well considered as it will take a portion of your earnings. To learn about all the information of low doc loans, you can consult a low doc finance broker who can guide you through the entire process.