Low doc car loans
Low doc car loans are available if you’re self-employed or work on a contract basis as a freelancer and don’t have regular payslips. These car loans provide an alternative to having to produce a lot of documents to verify your income to a lender.
What is a low doc car loan?
Instead of the usual lengthy paperwork often required for an Australian car loan application, your credit history and the length of time you have been operating your business will often be used to assess your eligibility for a low doc car loan. It may be that you will need a letter from an accountant to support your application.
Low doc car loans may be either secured or unsecured, and if security is required, often you can use the value of your car or your home. When this happens, the loan to value ratio (LVR) may apply. This percentage figure compares the amount you want to borrow against the value of the item on which your loan is secured.
Why do people use low doc car loans?
A low doc car loan is simpler to set up in terms of administration and can provide the funds you need to get the vehicle of your choice, subject to the lender’s approval. Some car loans are only available if you're buying a new vehicle, although most lenders are content if you want to buy a second-hand car as long as it has been certified as roadworthy.
What are the main features?
Low doc car loans may be secured on property or other valuable goods, or may be unsecured, depending on the regulations set out by the lender. There are both variable rate and fixed rate car loans, and most lenders will allow a vehicle to be used for both personal and business purposes, which is particularly beneficial if you want to use your car for both. While some lenders will allow you to repay your low doc car loan early, they may charge a fee for this. Applications for a low doc car loan are generally quick and easy, no matter where in Australia you live.
What are the pros and cons of low doc car loans?
As a customer, applying for a low doc car loan is less hassle, as there is no need to supply vast amounts of paperwork to prove your level of income. For this reason, getting a low doc car loan is generally a fairly quick and easy process; in fact many lenders simply ask their potential borrowers to sign a statement confirming their ability to make repayments.
You may be tempted to borrow more than you can afford to repay due to the ease of getting a low doc car loan. For this reason, it’s worth making sure you can meet the agreed repayment schedule within your means. As there is an increased level of risk for the lender, you may be charged higher interest rates for a low doc loan, and there may also be exit fees if you repay your loan early.