What do you know about a low doc loans? These loans have become a lifeline for many over the years and remain a valuable resource. Of course, many misconceptions and myths surround low documentation loans. These misconceptions muddy the waters and make it tougher to determine if the loans are suitable for you. So, what things should you know about a low documentation loan?
Self-Employed Individuals Can Qualify for Both Standard and Low Doc Loans
A lot of people believe that since they’re self-employed, their only option is a low documentation loan. However, that’s not quite true. It’s very much possible to qualify for both a low doc loan and a standard bank loan. While these loans were initially designed for self-employed individuals and small business owners, they’re not exclusive. If you have the necessary paperwork, you may qualify for a standard loan too.
You’ll Still Be Required to Show Documentation with Your Application
No-doc and low doc loans often confuse most and it’s all down to what sort of documentation is needed. Borrowers don’t need to provide the same type of documents as you would with a full doc, but some paperwork is still required. For example, instead of providing the lender with payslips, you could use your ABN, tax returns, business activity statements, personal bank statements and more. In some cases, lenders won’t need extensive paperwork to verify your income but others might. It depends on the lender.
Lenders Will Check Your Credit File
It’s easy to assume your application is likely to be approved once you’ve verified income but that’s not entirely accurate. Lenders look at the big picture and take a very close look at your credit file. It means they will examine your debt history, credit score and rating and more. Most do this so that they can build a picture of you as a borrower and whether you’re a calculated risk for them. Lenders check your credit, whether you’re getting a low doc loan or a standard bank loan.
Low Documentation Loans Often Come with High-Interest Rates
You should expect to see a high-interest rate when you get a low doc loan. While it is possible to decrease your interest rate (by having an excellent credit score), most rates will be higher than standard loans. It happens because you, as a borrower, are a risk in the eyes of the lender. Most will set an initial high-interest rate; however, this can be reassessed based on several factors.
Your Application May Not Be Accepted
You may meet the criteria of a lender but that doesn’t guarantee your application will automatically be accepted. Low doc loans vary, along with their lenders. Some lenders will have strict criteria and others will be a little less rigid. You might not be aware of it, so it’s good to know when searching for a low documentation loan.
A Loan with a Difference
Low documentation loans have become a great choice to consider. Of course, these loans aren’t suited to everyone but can offer many an alternative to traditional loans. If you don’t qualify for a standard bank loan, low documentation loans can be the best solution available. Now you know a few things about them, hopefully, you can approach a low doc loan with a clear mind, know how: http://www.lowdocloansco.com.au/