In recent years, more and more Australians have relied on low documentation loans to get some needed money more. However, many are actually unaware of what a low Documentation loan actually is. Loans with low documentation are an actual tool that everyone can use at their disposal when they cannot get their loans the traditional way. As the name suggests, they require minimal documentation, but how could this benefit you? Read this low doc loans q&a and find out answers to the most recurrent questions about low doc loans.
Most Common Questions about Low Doc Loans
1. What is a Low Doc Loan?
Low-documentation loans are financial services aimed towards those who find it hard to muster all the documents required in the case of traditional loans. Low doc loans can save them from all the hassle and the stress they’d go through in trying to talk with the representatives of a bank. These can also come in handy for those individuals whose credit scores are poor since private lenders will not put as much stress on that as banks and other institutions.
2. Will my income affect the final decision?
Definitely. No matter what type of loan you consider taking, your income will be a crucial aspect that creditors will take into consideration. Whilst banks may only look at your income, we also take a look at your alternative sources of income.
Why? Because sometimes, even though one has enough money to repay the loan, their form is rejected because he/she added his/her alternative income there. Alternative income can originate in a multitude of sources. Freelancing, for instance, to mention just one.
Low doc loans are fantastic in this respect. You will be able to get your loan because your creditor will see that you earn additional money outside of your salary.
3. How are the interest rates on these loans?
Unfortunately, the stories that these loans have higher interest rates than traditional loans are true. You are still seen as a high-risk borrower. Therefore, creditors will use higher interest rates as security. Moreover, you should expect to pay some additional fees you wouldn’t usually pay at a bank, for example.
But in the end, all of these are worth it if you’re going to get the money you were looking for. Just make sure you won’t have to return twice the sum you’ve borrowed. Many people have been ruined financially because they didn’t pay enough attention to what they were actually getting themselves into.
4. Who are these loans intended for?
People from all walks of life can apply for low doc loans. Usually, it’s real estate investors, self-employed individuals and other business owners. As a rule of thumb, all those who find it difficult to provide the tons of documents that banks request can easily get their hands on money through low doc loans.
5. Can I refinance a low doc loan?
Yes, you can. You can shift your low-doc loan to a standard one whenever you please. But you should be aware of the fact that it’s not cost-free. In fact, the costs of shifting to a standard loan might be too high to be viable.
If you can find some other loan from a creditor that won’t rob you blind, then you can definitely consider refinancing, especially when you’d get better interest rates and a better term. It all depends on your needs.
Refinancing doesn’t make sense when you don’t get better terms, so don’t make the mistake of losing the money you can’t afford to lose.
6. Are they safe?
If you have good money management skills and you know what you’re doing, then yes, they are safe. Moreover, in order for a loan to be safe, your creditor has to be a trustworthy one. It won’t do you much good to borrow money from anybody that poses as an unreliable lender on the Internet. And of course, you should not get the loan if you’re not confident that you can repay it.
Now you’ll be able to make informed decisions, and subsequently, avoid any problems that may come along the way. In case you want to know even more about this topic or you’re seeking professional advice, call us on 1300 138 188 for a free consultation or enquire with us today.