Certainly we all dream of having our own home and do our best to get there. However, for some, the road is not all roses, but a few thorns as well. While for some, it is easy to secure a home loan, other people tread this road differently. If you are self-employed and thus unable to produce relevant documentation for normal loans, then low doc loan is the solution for you. This type of the loan doesn’t require you to produce tax information or prove of constant income for you to get the loan. All you need is to apply for the loan, and certify that you are going to afford to repay the money. Once you have done that, your loan will be assessed and released within a short period of time.
Who is Eligible For Low Doc Loan?
Self-Employed People – low doc loans are appropriate for self-employed people that cannot be able to prove the uniformity of their income. This is because conventional loans require one to prove that he earns a certain amount of money. Through that information, the candidate is then deemed eligible for loan processing. This locks out self-employed people because their income depends much on the market forces. Low doc loan though solves this problem as it allows this group of people to apply for the loan without many documents.
Small Businesses – small businesses may also get it hard to be approved for a loan in conventional lending institutions. This is because the lending institutions require information such as tax which small businesses may not have. Low doc loans therefore help the people running these enterprises to get loans to expand their businesses without any problem. With this loan, they don’t have to sign many documents, but rather certify that they are able to repay.
Conditions Necessary for Low Doc Loan Approval
Even though low doc loan doesn’t require you fulfill many conditions, there are some conditions you need to meet. These conditions are necessary so as to ensure that investment made towards your projects will not backfire on the lending institutions. In most cases though, you are likely to meet these conditions. They include:
· Prove that you are Self-Employed – the lending institutions would like to know whether you are really self-employed or not. You will need therefore to produce ABN to show that you are self-employed. This condition helps the lending institution to determine whether you are eligible for the loan or not.
· Good repayment history – if you have borrowed a loan before, it is good to have a good loan repayment history. This portrays you as a candidate that can be trusted to repay the money borrowed. Poor repayment history though doesn’t disqualify you from getting the loan, but rather it reduces your chances of being approved for the loan.
· Certify Your Income – although you may not do it in writing, it is important to prove that you have got constant income. This is because it is through your income that you are going to repay the loan from. So as to enhance your chances of being approved for the loan therefore, you need to self-certify your income status.
Uses of Low Doc Loan
· Business Reinvestment – low doc loan is very appropriate when you need money to reinvest or expand your business. This is the case more so when you don’t have enough money to buy stock or business tools to make your expansion a success.
· Share Buying or property investments– low doc loans also can be very appropriate when investing in long-term investments such as shares and real estate. This is the case more so when your business or work cannot raise the required amount of cash to purchase properties or shares in the market at the moment.
· Home Improvement – you can also take this type of the loan to finish your home or refurbish it further. This is because your small business may not offer a large amount of cash needed to finish a house.
The Lending Rate of the Low Doc Loan
In the past, the lending rate of the low doc loan was much higher than conventional loans. This though has since changed, and the lending rates of the low doc loans are as same as the standard loans. This means that the person applying for standard loans and the one who is applying for the low doc loans, both of them will end up paying the same amount. The advantage is that self-employed and small businesses have a chance to get approved for the loan, something that is exactly opposite when it comes to conventional loans.
In general, low doc loan is helpful to people that are not able to prove their consistency of their income and tax report. That is why it favors the people who are self-employed and those running small businesses which usually either reinvest money into their business, or don’t have money to expand their businesses. The lending rate is almost the same as the standard loans, but its requirements are fewer. If therefore you are self-employed or you run a small business, this is the loan for you.
As Lana Wilde believes sharing information can help others, here she writes about how loans are obtainable even for people with low documentation with Freedom Loans.