Low Doc Home Loans were designed to streamline the process of applying for loans for the increasingly self-employed borrowers.
Home and commercial loans are designed for people to have the means to meet loan payments but were unable to provide adequate documentation to support their income.
Usually, the lending financial institution will require potential borrowers to provide two years of personal tax or financial business or a business that has been audited.
Some business owners find it difficult to keep the document up to date, and the banks understand. No documentation mortgage Loan provides you with less proof of income and assets to borrow.
Image Source: Google
Low Doc loans are basically the same as any other bank loan, but with a slightly higher interest rate to cover the additional risk, the bank will take to provide borrowers with money. They can have a variable rate or a fixed interest rate setting.
Low Doc Loans vs. Bad Credit Loans
It is important not to confuse "Low Doc Loans" to "Bad Credit Loans". Bad credit implies that the borrower has a problem with paying bills on time or even bankruptcy in the past.
Low Doc not only for people with bad credit. They are primarily designed to avoid extensive paperwork for self-employed or small business.
Whether the borrower has bad credit or not, the new loan would need to be secured against the assets of the debtor, be it property, business or something else.
Banks in Australia will ask for some concrete evidence that the new loan payments will be met and new loans will not jeopardize the borrower's ability to meet the financial needs of everyday life.