Low Doc Car Loans

Need to finance your car but you’re self-employed?

Low doc car loans could be the solution.

Unfortunately, for business owners, obtaining finance is not always easy. Depending on the status of your business, many potential lenders may see you as a liability or risk simply because ongoing work can’t be guaranteed. Even if you are able to provide a history of earnings, self-employed borrowers are classified in a different category to PAYG borrowers.
If you have been declined by a bank for a car loan, a low doc loan may be a solution.

How Low Doc Car Loan Work

When it comes to general car loans, the qualification criteria is strict compared to many other types of asset finance – however, the upside is a lower cost loan. With low doc car loans, there is greater flexibility in the approval process. The drawback is however, a higher interest rate in order to lessen the ‘risk’ involved with lending you money.
If you are self-employed or have an irregular income such as seasonal work, freelancer, consultant or contractor, a low doc loan is a genuine option for funding. If you rely on your car or use it for your business, this could be the best (or only) choice for you.

Comparing and Researching Low Doc Car Loans

There are a number of factors to consider when reviewing lenders. In general, you should keep the following points in mind when researching:

  • Fees and Costs Included – Everything from upfront fees to early exit fees must be taken into account. Ask for a list of all fees.
  • Interest Rates – These kind of loans generally have higher rates than most loans due to their nature so shop around and try to find the best deal and lowest rate among the pack. Be wary of ‘introductory rates’ that change after a specific amount of time has passed.
  • Documents and Identification – Have all your financial details ready, including: tax returns, banking details and details on debts and assets.
  • Loan Duration – You need to make sure that the duration of the loan is applicable to your current situation and requirements. The options usually range from 1 to 7 years and between $3k to $100k.
  • Restrictions – Review terms of use carefully, especially if it’s a work vehicle.

Low Doc Car Loan Options

Non-Bank Lender – There are numerous non-bank lenders throughout the country, credit unions and building societies. Most provide competitive rates on secure and unsecure car loans for business owners.
Car Loan Brokers – A broker is a great way to quickly identify what loans are available to you based on your circumstances. They have relationships with multiple lenders and can even negotiated on your behalf.
Specialist Lenders – There are a number of online car loan lenders. Many provide low rates and flexible approval criteria. Speed of application and approval is a main benefit of these loans.
Chattel Mortgage – This is an option where the financier loans the money to the borrower to purchase the vehicle, where the lender will take charge (mortgage) over that car. The car is then invoiced to the borrower allowing them full ownership from purchase.
Co-signer – If you have a person willing to co-sign on a loan for you, this can allow for a better rate and terms. A good way to organise finance with a co-signer is to create a lease agreement with them. This can help alleviate the risk on their end.

Advantages and Disadvantages

The Pros

  • Perfect options for those who are finding it difficult to obtain a loan for certain reasons or are self-employed.
  • Perfect for small businesses.

The Cons

  • Come with much higher interest rates and fees than other loan types.
  • May impose restrictions and contain strict criteria for lending due to irregular income.

When Choosing a Lender

It’s important to always review the terms and conditions carefully and ask for any verbal promises to be put in writing if they are not in the contract. Other considerations include checking their actual business licencing, online business reviews/complaints.

Do Some Calculations

Just because a lender says you qualify for a certain amount, doesn’t mean you can afford that amount. Be sure to do your own calculations and consider all running costs of the vehicle. Items such as:

  • Insurance
  • Car Repayment
  • Maintenance (tyres, oil, checkups, etc.)
  • Petrol
  • Roadside Assistance
  • Road tolls

How to Apply for a Low Doc Car Loan

Depending on your lender, you will be able to quickly apply online or at their business location. As a basic rule of thumb however, you must provide the following things:

  • Your personal details (proof of identity, name, and address).
  • Proof of car insurance for the actual car you are buying.
  • Car’s value.
  • Detailed business, financial, and reasons documentation (car use).
  • Any trust deeds or partnership agreements (if applicable).

In certain situations self-employed borrowers are limited to their loan options in the beginning, especially if you’re a newer business. The longer you are in business or the more money you have to put down, the better you terms will be. Depending on the length of your contract, you can look to refinance your car loan as you proof your credit worthiness and further establish your business.

Frequently Asked Questions

If you have an established business, try speaking to a bank or car loan provider first to see if you would qualify for a mainstream car loan. Self-employed doesn’t mean that a low doc loan is the only option.
This is completely dependent upon the individual borrower and their circumstances. Those with good credit, a large down payment and strong business history would qualify for a better rate than a borrower with the opposite.
Many lenders will consider bad credit, especially if the other elements of your application are strong (business financials, down payment, etc.).