5 things to keep in mind about Low Doc Loans

5 things to keep in mind about Low Doc Loans

Within the last few years, low doc loans have become hugely popular as lenders tighten eligibility. While you have the ability to repay a loan, you might not have the documentation to support your application. It’s not only frustrating but incredibly tiresome. Fortunately, low documentation loans give borrowers an alternative loan option.  

So, what five things do you need to know about low documentation loans? 

A Specialist Lender Might Be Required to Find a Low Doc Loan 

An important piece of information to know about low documentation loans is that many banks do not offer them. However, that doesn’t mean to say you can’t find them. You will, however, need to search for a specialist lender that offers low doc loans. The truth is that since the Covid-19 pandemic, lenders have changed their approach to no and low documentation loans. It means some mainstream lenders no longer offer them, however, in exceptional circumstances, they’re available.  

You Will Still Be Required to Show Documentation 

Despite the name of the loan, a low doc loan does still require some documentation. Now, the type of documents required is far less exhaustive than that of a standard bank loan. You will also be allowed to provide alternative documents. For instance, you must verify your income or declare how much you earn if you cannot show a recent tax return.  

Of course, lender requirements vary. Typical paperwork lenders require may include business and personal bank statements, business activity statements, and GST registration.  

Credit Does Matter to Lenders 

While you think credit isn’t important, it is. Lenders have a look at your credit file to establish whether you’re a credible risk. For instance, if you have a good credit score, you stand a better chance of obtaining a loan. That, of course, depends on your income and other factors. It may also help determine the type of interest you’ll likely face. A low doc loan can be a good option to consider but your credit history will be looked at closely, so be prepared for it.  

You’ll Likely Experience High-Interest Rates 

One of the more irritating aspects of low doc loans is that most come with higher rates of interest. It’s frustrating and something few borrowers want to see. Of course, interest rates come down to the lender and your credit history. For example, if you have a stellar credit history with a great credit score, you might find interest rates to slightly decrease.  

Low Doc Loans Might Not Be Your Only Option 

A low doc loan might not be your only solution when it comes to being self-employed. There could be other loan options available, but this again, depends on your personal circumstances and finance. You would have to speak to different lenders to find out which loans you would be eligible for. In most cases, a low documentation loan can be ideal when there are no other funding options available.  

Get in The Know Before You Apply for a Loan 

Loans have become a necessity of modern life. They are used for all sorts of reasons, from buying a home, or car, and for business. Getting the right loan, however, is crucial and it’s important to understand just what you’re getting into. Low documentation loans are useful but you need to know about them. For instance, they typically come with high-interest rates and lenders look at your credit history. They can also be useful for those in need of viable finance. A low doc loan can offer you a credible funding source. Read more! 

Desiree Durgan

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