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Finance Terminology Part 3: What is a Low Doc Loan?

If you’re looking to understand what is a low doc loan then you’ve come to the right place!

A low doc loan is a type of loan that is designed for borrowers who may not have the usual documentation required to secure a traditional loan or finance product. Low doc loans are commonly used by self-employed individuals or small business owners who may not have traditional forms of income verification such as employment contracts or regular payslips. Knowing what is a low doc loan is very useful if you think you may not qualify for approval due to a lack of traditional income documentation.


What does low doc mean when it comes to car finance?

In the context of car finance, a low doc loan would allow a borrower to finance the purchase of a vehicle without having to provide extensive documentation of their income or financials. This can be especially useful for self-employed individuals who may have fluctuating or irregular income streams, or for those who have recently started a new business and may not yet have a full- year of tax returns to provide as proof of income. Low-doc loans are typically only available from specialised lenders, meaning borrowers may have a more limited selection of loan products to choose from.


What does low doc mean in terms of documentation required?

The specific documents required for a low doc loan will vary depending on the lender and the borrower’s specific circumstances. However, some common documents that may be required for a low doc loan include:


  1. Proof of identity: this could include a drivers license, passport, or other government-issued identification.
  2. Proof of income: the lenders may still need to verify that the borrower has the financial means to repay the loan. This could be done through bank statements, tax documents, invoices or receipts showing incoming from self-employment.
  3. Credit history: a borrower’s credit score and history can be an important factoring in determining loan eligibility.
  4. Asset documentation: some lenders may require information about the borrower’s assets, such as property or machinery, as additional collateral for the loan.
  5. Business documentation: for self-employed borrowers, the lender may require additional information such as a business plan or financial projections.


What is a low doc loan example?

Let’s say you are a self-employed plumber and you want to finance the purchase of a new work ute. You have only been operating under your own ABN for less than 12 months, and as you are starting out you have not been paying yourself a consistent wage over this time. You have a credit score of over 1,000 and a solid history of paying your bills on time. You also own $10,000 worth of plumbing equipment and parts.


There is a strong chance you will qualify for a low doc loan, which would allow you to finance the ute without having to provide traditional documentation of your income. The lender would still assess your creditworthiness and may require other forms of documentation, such as your credit report or proof of plumbing assets owned, but the lack of traditional income documentation would not automatically disqualify you from obtaining a loan.


Overall, low doc loans are a good option for borrowers who are unable to provide traditional documentation. Knowing what is a low doc loan will allow you to make an informed decision when it comes to choosing the right finance option for your situation.

To find out if you would qualify for a low doc loan get in touch with one of Fido Finance’s vehicle finance brokers for an obligation free chat today by visiting us online or calling the team at 13 34 36.

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