Credit Capital

What is a low doc car loan?



A low doc car loan, simply put, is a car loan where a low amount of documentation is required to be approved. Due to the compliance regulations within the National Consumer Credit Protection Act (NCCP) this product is not available on any consumer loan. Low doc loans are only available to self employed applicants where the car will be used for 51% or more business use. 


Lending criteria and the actual documentation required for a low doc loan varies from lender to lender, you will generally require the following though: Good credit history, a GST registered abn that has been active for more than 18months, asset backing (home owner) or 30% deposit. These are not hard and fast rules however. Some lenders will do low doc loans for newer businesses depending on circumstances, and some lenders will do a low doc loan for a non asset backed applicant with no deposit, providing they meet some other criteria. 


If you qualify for a low doc loan, the process becomes very straight forward. Other than the standard requirements of completing an application, providing ID and privacy consent, you are usually only required to self declare your business’s annual turnover and profit figures without providing any financials or other income evidence. 


This is a great product for both businesses and lenders. It is often the case that a business’s profitability on paper isn’t truly reflective of the business’s actual performance, making it hard for a lot of businesses to be approved for full doc loans as the serviceability isn’t always evident on paper. Similarly on the lender’s side, if all business loans were processed as full doc loans, the processing time for lenders would be significantly increased, therefore increasing the lender’s admin overheads, meaning they would have to offer higher interest rates to cover their costs, therefore becoming less competitive. Lenders are businesses as well, so do everything possible to maximise efficiency so they can offer a competitive product to their clients, whilst still being able to earn an income themselves, without exposing themselves to too much risk. As they are only lending to established businesses, with good credit history, that have either asset backed directors, or directors providing significant deposit towards the transaction, they are able to mitigate a significant amount of risk by lending to this demographic without requesting income evidence.



Are low doc loans more expensive?

There is no specific answer to this question as it varies with all lenders. Some lenders do charge a slightly higher rate for low doc loans, some lenders actually charge a lower interest rate for their low doc product, and believe it or not, some lenders charge the same for all their business loans whether or not it is full doc or a low doc loan. 


The simple way to get your head around the market and work out whether a low doc loan would be suitable to you, and which lender has the best low doc product for you, is by talking to a professional finance broker. A broker will be able to assess your circumstances, and provide unbiased advice regarding what loan products are suitable to your needs, and which lender will be able to deliver you the most value. They act as a one stop shop and will look after the process for you from start to finish, so you can focus on the more important aspects of running your business.