Getting a car loan when you're working for yourself is a hassle. You'll find you're turned away by lenders for not having the proper documents to borrow the money you need. If you're in this situation, a non-conforming loan like a Low Doc car loan may be right for you.
What is a Low Doc car loan?
Low Doc or “Low Documentation” car loans are an option for people who are self-employed, run a small business or do not have up-to-date financial documents to satisfy lender requirements.
Full time investors may find Low Doc car loans are suitable for them.
Generally, lenders or financiers require a detailed proof of income (i.e., pay slips), tax returns or company financial statements to assess whether they will lend you funds for your car.
Low Doc car loans are flexible and may be suited to your situation.
What you will need
If you’re looking to take out a Low Doc car loan, you’ll need to self-certify your income. This may come in the form of an Income Declaration, which replaces a requirement to present financial statements in a conforming car loan.
Low doc (and no doc) car loans are available to Australian Business Number (ABN) holders.
Generally, loan applicants will need an ABN that has been active for at least 12 months. Some lenders require this to be 24 months, and to have been registered for GST for the same period.
The car may also need to be used for more than 50% business use.
You will also need a good credit report and to be a verified property owner. Typically, there is a minimum 30% cash deposit option for non-property holders.
Some Low Doc car loan lenders require you to have paid for comprehensive car insurance on the vehicle. Others may need this and will not finance a car bought in a private sale, i.e., not from a licenced motor car dealer.
These requirements vary from lender to lender.
How do I apply?
You should speak to a financial professional or a trusted lender to help you on your way to a Low Doc car loan. You may want to consult a loan calculator, such as ASIC's MoneySmart calculators, to figure out what you can afford beforehand. They will help you navigate the different requirements and get you settled into something that works for you.