Let’s face it, not everyone fits into the typical mould when it comes to taking out a loan. Whether you are self-employed or have other external factors that influence the regularity of your income, it can prove difficult to apply for a loan. Most creditors want to see pay slips, bank statements and other financial documents before determining whether or not you are eligible for the loan.
Of course, this can be difficult when you don’t have regular payments coming in. The great news is, it’s still possible to take out a loan using a low doc loan. Let us take a look at what is a low doc loan and how it can help you.
What Is A Low Doc Loan?
Are you wondering, what is a low doc loan? You aren’t alone. These loans have been designed for self-employed workers, contractors and freelancers, who can’t provide the traditional documentation that is needed when taking out a loan. Many people mistakenly think that the term low doc means you have to provide less evidence of your financial circumstances.
This isn’t true at all. Instead, it’s about providing different types of evidence that do prove your income and moving away from the traditional bank statements. They are simply a more flexible variety of loan that can help out those who are self-employed or don’t have a regular income.
Not all lenders will offer you a low doc loan option. If they do, it can come with a higher deposit or interest rate, so it’s important to do your homework and shop around between lenders.
How To Get A Low Doc Loan
Now that we have an understanding of what is a low doc loan, how do you get one? While it’s true that you don’t need to provide the traditional documents for this type of loan, you do still need to prove your income. This can be done in a number of different ways and will often be dependant on your lender. For some, it’s as simple as showing your last one to two years of personal and business tax returns and income tax assessments.
Some lenders may even let you self-certify your income. This is also known as income declaration or low doc declaration, which is an accurate statement of the income you have made under your self-employment. You sign a certificate which states your income is sufficient to meet your home loan repayments. In order to do this, you may be asked to provide:
- A letter from your accountant.
- A business bank statement.
- A business activity statement (BAS).
What Is A Low Doc Loan: The Benefits
Knowing exactly what is a low doc loan, it’s time to consider the benefits that come with them. If you are self-employed, the traditional methods of applying for a loan won’t work, so the main benefit of a low doc loan is offering an alternative to such workers to ensure they have the same opportunities to take out a loan. They offer a more flexible solution for self-employed, contractors or freelances, and are a great alternative when it comes to taking out a loan.
The process of taking out a loan is also often simpler than traditional loans. While you still need to provide evidence of your income, there is more freedom in how you do this. It often involves speaking with your accountant and making sure you have the right proof to help you secure the loan.
Before taking out a low doc it is important to ensure you are actually eligible. From the perspective of the lender, they want to make sure you will be able to pay back the loan. In order to prove your employment, you will need to hold an Australian Business Number for at least 12 months before applying to take out a loan. If you are applying for a home loan, you will also be required to put down a deposit, just like with a traditional home loan. This is generally about 20% of the value you need to have saved up.
Naturally, the preferences chance between lenders, so the most important thing you can do is ask around and look into the different requirements between lenders. Once you find one that works for you, then you can go about the process of applying for the loan.
Get A Low Doc Loan Today
Now you know what is a low doc loan, you may be looking at taking one out. The team at Bad Credit Loans is on hand to help you out. We understand that the traditional methods of borrowing are a one-size-fits-all approach, which just doesn’t work for everyone. If you fall outside this mould, then take the opportunity to take out a low doc loan today.