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Low Doc Loans are given on the basis of low documentation or no
documents. One thing you have to provide is the self declaration of
income by you. Low Doc Loans have gained popularity in the recent years.
It is helping many people who do not fulfil the criteria for standard
loans but you need to know few things before you apply for a low doc
loan. They are:
- Low Doc Loans, as the name suggests, is a type of loan that can
be applied with minimum of documents. The loan can only be got by
mortgaging a security against the loan. The banks do not want
any verification of income, assets and liabilities to issue a loan.
- Australian businesses require a valid ABN for 2 years and most
require BAS statements.
- A self-verification of your income is only necessary
documents required for the loan to get issued. This loan pattern has
greatly helped the self employed group who does not have documents
ready for a loan. The low doc loan market has increased and occupies
about 5% of Australia’s house building loans. People who do not have
an income history, people with low-income
group and people with bad credit rating are most benefited from this
kind of loans.
- The banks charge a higher rate of interest for this kind
of loans to a tune of 1%-2% as the risk involved in such loans are
higher than in other standard loans. The loans, which are issued
without checking the documents, bear a greater chance of
non-repayment that is three times more than that in case of normal
loans.
- The low doc loans once taken may be refinanced with
better acceptable terms once you can produce the required documents
for the same. Low doc loans meet the immediate requirement for money
which is hard to get if documents are not ready.
- You have to keep a collateral security against the loan
you want to take. The loan amount usually ranges between 60%-80% of
the value of the mortgaged security. If the loan amount is not met
within the stipulated time then the bank would sale the security to
realize the amount.
- The loans involve additional amount of security including
car or other asset, as well as the need to provide a larger deposit
towards the cost of a property. These loans have additional fees and
charges including risk fee, mortgage indemnity insurance. The
insurance done help the lender more than you.
- There are numerous brokers to help you decide the right
available loan option by comparing different banks and their rates.
However, often they charge high fees and misguide you. The
government has passed Bills to regulate the working of the
brokers. If you are lending the service of a broker, check his
credential thoroughly.
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