Applying for any form of finance can be a complicated and confusing process, full of supplying documents and signing forms. It’s no stretch to say that it can be a complete nightmare, and that is providing you have all the necessary paperwork! But what if you don’t tick all of the ridiculous boxes lenders require you to? More often that not, it means you’ll be unable to even start applying for the money, regardless of whether you know you can meet the repayments. For anyone self employed or with a variable income, it can be such a struggle. What may surprise you is that there are other options, ones that you will meet the eligibility criteria for. Self employed people, meet no doc loans. This type of finance isn’t hugely advertised, so it’s no surprise that you haven’t heard of it. So keep reading to find out everything you need to know about no doc loans.
What Are They?
Anything finance or banking related sounds intimidating and complex, but most of the time it really isn’t. No doc loans are no different; in simple terms this is a funding option that doesn’t require the potential borrower to provide the lender with any documentation of their income.
What Can I Get One for?
This type of loan is generally quite similar to any other finance option, and you can get one for a range of different purposes. Many people considering a no doc loan are business owners, so you are able to get funding to expand your business. As well as this, you are also able to use this for refinancing or debt consolidation. But, the best part is that you are able to use this form of finance to purchase a house.
How Much Can I Borrow?
The amount you can borrow really depends on the reason for the finance, what financial institution you choose and your credit rating. In most cases the lender is unlikely to give you more than $1,000,000. In terms of mortgages, many lenders will allow you to borrow up to 80% of the property value for a residential building, or up to 65% of the value for a commercial building.
What Are the Interest Rates?
As with any type of finance, interest rates will vary depending on the type of lender you use, how much you are borrowing and your credit history. However, no doc loans are usually a short term finance option, meaning the interest rate will increase after a few years. This form of credit is also considered as ‘rate for risk’, essentially, the higher risk you are to the lender, the larger your interest rate will be. Generally speaking, interest rates range from about 7%p.a to 11% p.a.
Can I Still Get the same Mortgage Options?
Despite the interest rate being slightly higher, you are usually able to get the same mortgage features as you would with a standard mortgage. This means you will have access to features such as: fixed interest rates, variable interest rates, line of credit, redraw facility, 100% offset account and salary crediting. So, just because you don’t need to provide proof of income when you apply, it shouldn’t usually impact the rest of the process. You will usually still be given the same options and will have the opportunity to choose the best repayment method and interest system to suit you.
How Can I Get One?
Many of the major banks and lenders in Australia no longer offer no doc loans, however, this isn’t to say it is impossible to get one. There are plenty of other options, such as smaller, specialist non-banks or private lenders. Although if you opt to borrow from a private lender, be very careful as they are not all reputable. If you are considering this type of finance, it is best to speak to a financial adviser or broker. An expert will be able to make sure you understand the terms of the agreement and ensure you get a competitive interest rate.