Wouldn’t it be great if you could get funds to invest or to buy property without providing complete verification documents? Loans are generally characterized by going through an endless stream of paperwork and getting the information provided by you multiple times. However, when you apply for a low doc loan, most of these steps are not required to be followed. These loans are generally applied for by self-employed individuals who cannot provide a satisfactory proof of income. Take a look at some basic facts about low document loans and how you can successfully qualify for them:

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When and For Whom Are Low Doc Loans Ideal?

  • For individuals who have an unsettled and fluctuating income
  • Those who have been self-employed for a minimum period of 6 months
  • If your financial records and tax returns are not up to date
  • People who had their home loan applications declined by the bank
  • Those who prefer to show an income declaration instead of showing 2 years of financials and tax returns         

Benefits and Drawbacks of Low Doc Loans

Most of the low document loans have standards and features that are quite similar to the regular fixed rate and variable loans. Make sure that you learn the terms and conditions and understand them well before signing the deal. 

  • As the documentation required is low to none in some cases, these are much convenient that regular loans where you have to file an endless number of financial documents. The sanction process is much easier as well.    
  • However, it is widely known that the interest on such loans can be quite high when compared to traditional loans. This is because providing loans without complete documents increases the risk factor for the lender, thus accounting for the surge in interest rates.
  • In most cases, you will not be allowed to borrow more than 80% of the property value that you have declared to the lender. Sometimes, you may be able to bring up the amount to 90% but this will come with another increase in the interest rates.      

Know Your Lender

The success of your low doc loans being sanctioned depends somewhat on the lender you have chosen and if you are familiar with their criteria. While some may have inflexible requirements, some others might be more lenient. Find out which lender will be most ideal for your unique needs. You can also get professional help to organize your loan application in a way that it will be sanctioned as soon as possible. It is advisable to try out a few lenders before choosing the most favorable offer.         

Low document loans are generally provided by private money lenders. These lenders, unlike financial institutions, are not interested in assessing the past credit score of the borrowers. All they require is an income declaration signed by you which will be used to assess the loan that you have applied for and determine whether the risk is worth taking. Although you will have to declare your assets and liabilities to get a low document loan, it is possible to apply even with bad credit.

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