So, you’re self-employed and need a personal loan? Well, conventional loans require you to submit payslips, tax returns, and other proof of income, but don’t let that bring your hopes down. Low doc loans allow you to get loans without all that paperwork. It doesn’t matter if you’re self-employed or unemployed. They require you to sign an income declaration form that will constitute the basis of a lender’s assessment. There’s a high chance you get asked about your assets and liabilities. As the lender relies solely on your own declaration, they usually charge higher interest rates to offset the risk of lending money to “unproven” borrowers.
Low doc loans are naturally flexible, they can be used to back immediate needs, personal or professional, and without all the bureaucracy. The amount of money lent depends on both your income declaration and Business Activity Statement (BAS) provided. The sums can go from $1500 to $3 million.
Am I Eligible for Low Doc Loans?
Despite having small requirements, most lenders have strict regulations. They will thoroughly verify the applicant’s paperwork to ensure no tampering was involved. Certainly, not everyone can apply for a low doc loan. The self-employed, freelancers, small business owners, and full-time investors are potential borrowers. These individuals often have problems showing their income to banks.
Borrowers must complete a declaration of their income, as well as declaring one’s ability to afford a loan. This is called self-certification. Banks are generally scared of approving low doc loans, as these borrowers are more likely to default than standard loan borrowers. We can’t really blame them for thinking like that. After all, would you lend $1500 to an unemployed person solely backing his case with a self-certification of his income?
Do I Need a Low Doc Loan?
Besides being eligible for low doc loans, ask yourself if you need it. The reason I tell you this is because, for certain needs, a different loan option (with lower rates) might apply. If you need to cover some medical bills, health insurance can cover you, and if you need to do some renovations at home, home equity loans have lower rates. Think of a payment plan in time! Given the interest rates of low doc loans, you might find yourself pilling debts if you make a mistake.
Low doc loans come at higher rates because of the risks that its borrowers represent, with the scant amount of proof provided. A wise move is trying to offer more evidence of your finances to lower the interest rates. Some money lenders have you provide a substantial initial payment, while others have you provide collateral such as cars or property. I advise against the latter. A word of caution if your credit score isn’t pretty. Finding a low doc loan with a fair interest rate becomes harder when your credit rating is low.
Going in blind expecting the best is a proven way to invite disaster. Make sure you devise a repayment plan to prepare for the worst. Properly managed debts lead to improved financial health. It is also important that you have a plan for the money you get. If the amount is high enough, you might think about using a part to cover certain personal expenses, but don’t forget you must secure the means to produce more, or at least enough to cover your debts by the end of the period.
What Do I Need for Low Doc Loans?
The requirements are much lower compared to conventional loans but they’re still present. Your lender will request:
- Australian Business Number (ABN)
- Business Activity Statements from the past 12-months (BAS)
- Proof that you’ve been working in the same industry for a period (usually between 1 and 2 years, varies)
- Registered business name
- Income declaration
It is certainly a change of pace. As a self-employed person, your time is much more valuable, meaning that you can’t allow yourself to spend a lot of time running from A to B just to get all your paperwork in order. The injection of cash into your reserves means you can focus on your company. Low doc loans can help you finance your enterprise’s equipment or car, pay your employees, renovate your stores, or cover general expenses.
Not everyone has access or means to provide the paperwork required by banks to approve loans, but don’t let that limit your financing options. Low doc loans are the alternative to conventional loans for those who can’t submit enough proof of income, for one reason or another. Business owners, freelancers, full-time investors, self-employed, and even the unemployed can have a chance! Low doc loans don’t rely on verifiable income or consistent cash flow. Bad Credit Loans provides low doc loans to thousands of Australians. Contact our team today and get a free consultation.