A low doc or documentation loan is a term that stands for a mortgage or secured loan, which one can take out by using different documentation. These types of loans are generally used by those who might find it problematic to provide a conventional and certified income proof. With an ample number of low doc lenders, this type of loan has become very popular over the past couple of years.
The interest rate that is offered by a low doc loan is much higher than the standard variable rate but this difference seems to fade away with time.
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How does a Low Documentation Loan Vary from a Standard Loan System?
Unlike the standard form of the loan system, the low doc loans will not require income proof like tax returns or salary statements. Also, when it comes to low doc loans, the low doc lenders only lends to those people who can give a declaration that implies that he can afford the loan. This system is called self-certification.
Low documentation loans are highly recommended to those people who are self-employed and also for those full-time investors who have problems in showing a high-income level. But one thing should be kept on mind that, if you are thinking of indulging in this type of loan, always looks for trustable low doc lenders.
What are the Various Types of Low Doc Loans?
There are diverse sorts of low doc loans that one can opt for. The various types of these loans are specified here:
- The basic low doc loan: When someone is availing a low this category of low doc loan, then the low doc lenders will provide you with a discounted rate of interest even for a very minimum amount of loan. You are also permitted to make additional redraws and repayments with a basic low doc loan but for this, you might be charged. In this case, you can read the terms and conditions of the loan agreement before availing such loans.
- The professional package low doc loan: This type of low doc loans will provide you with various ranges of banking products that come with significant discounts. All these discounts are available for a low annual fee. Almost every time, you are provided with free 100% offset and account, credit cards and cheque account along with discounts on your contents and home insurance. But most low doc lenders that give these professional loans doc loans will have different rates of interest.
- The fixed rate low doc loan: Low doc lenders sometimes offer you with the discounted fixed rate. But this only happens when your loan is combined with the professional package. With this loan type, you are permitted to lock your rate for a long period of time. Even few lenders can also offer your flexible rate of interest and you can choose any mode as per your needs.
- The line of credit low doc loan: With this line of credit low doc loan, you are able to use your loan account with your daily purpose banking account. You will be able to make withdrawals through ATM. You can write cheques and also pay your bills through Internet banking after linking the loan to your credit card.
Applying for a low doc loan means you have to provide specific information to your low doc lender. The documents that you have provided to your broker are – banks statements and a statement of your business activity.
The most impressive thing is that you have to sign an income declaration as you are not providing a conventional income proof. If you a self-employed borrower, a low doc loan is suitable for you.