|
In the past, you may have faced long delays and immense paperwork
before getting a loan from any financial institution. Low Doc Loans come
to the rescue sparing you the lengthy documentations. These loans are
provided to you on the basis of low documentation that is less amount of
paper work. Here, you only need an ABN and do a Self Certification where you
would state that you would pay all the installments in due time.
The lenders charge higher rate of interest for the additional risk that
they put up for the nearly no-paper loan. The loans are provided at a
fixed or variable rate of interest. Low Doc Loans are only provided
against some security and the non-repayment would lead to the selling of
the asset by the lender. Loans are provided to the extent of 60% of the
security mortgaged and can amount to as high as $2,500,000.
The reasons for borrowing can be any lawful reason including small
business needs, car loans and others. Anybody from a rich businessperson
to a low income group person can get such loans until loan amount does
not exceed 60% of the value of the security. Need for the Loan
Now the question is whether it is useful for you or not. As stated
earlier, Low Doc Loans can be taken by any person and you can also get
it. But if you have all your papers ready, then a loan with higher rates
of interest is a bad option. Considering a Low Doc Loan completely
depends on the need and status that you are in now. You should decide
whether to go for a Low Doc Loan or not only after considering the
advantages and disadvantages. Advantages of Low Doc Loans
The advantages and the fastness of the approval of loan have made Low
Doc Loans a popular one in Australia. All major banks use to provide
this type of loan but after the GFC of 2009, you are better off
enlisting the services of a mortgage broker:
- The main advantage is that it takes low amount of paperwork and
saves you from a great deal of harassment.
- The time taken is also very less due to the reduced paper work
and formalities. If you are in real hurry of fund then you can go
for a Low Doc Loan and after you have crossed the crisis period, you
can get your loan refinanced by the bank at more acceptable rates
and conditions.
- If you are a person in a business with a valid ABN, then this kind of loan
is suitable for you, as in that case the desired documents life tax
returns and two years of financial data would be missing for you.
- Only having an asset can get you a loan up to 60% of the market
value of the security.
- It is also an option for low income groups who do not qualify
for a standard loan.
Disadvantages of Low Doc Loans
Nothing in the world is perfect and so is Low Doc Loans. These
loans also come with some black spots. You should be aware of those
before taking the loan.
- Low Doc Loans come with a higher rate of interest owing to
the greater risk involved in such loans.
- Many institutions require a valid ABN of more than 2 years.
- After the GFC, most banks require BAS statement.
- Payment of additional fees and charges including risk fee,
mortgage indemnity insurance, additional security for the loan
are also involved.
- The loans are usually of short period and non-payment leads
to the selling of the property kept as a security.
- Those people who think this kind of loans are perfect to
hide the high incomes from income tax they have a high risk of
being caught.
- Once you get a Low Doc Loan, then again wants to get it
refinanced you would be charged with charges all over again.
Therefore, if your need for fund can wait and you can get
your papers ready then it is always advisable to take a standard
loan and not to pay the extra costs involved. But, decide on
whether a low doc loan is appropriate for you by comparing the
pros and the cons.
|
