Low doc car loans: finance for self-employed buyers

What is a low doc car loan?

It's a vehicle loan, usually for a car, ute or van used mainly for business, where you show your ability to repay using alternative documents instead of full tax returns and financial statements.

It's typically aimed at self-employed people and ABN holders: sole traders, subcontractors and small business owners who have the income to support a loan but not the full paper trail yet.

What lenders commonly look for

Low doc still involves paperwork, just different paperwork. Requirements vary between lenders and with the size of the loan, but lenders commonly look for:

• An active ABN with some trading history
• GST registration, for some lenders and loan sizes
• Recent business bank statements or BAS
• An income declaration, sometimes signed by your accountant
• A summary of your assets and liabilities
• A clean credit history, and in some cases a deposit or property ownership

You still have to show the loan is affordable

A low doc loan is not a guaranteed approval. Lenders still assess whether you can meet the repayments over the loan term, check your credit history and consider the vehicle itself. Different lenders weigh these things differently, which is where comparing options helps.

How it compares with a full doc loan

A full doc car loan relies on tax returns, financial statements and detailed income verification. If your paperwork is current, a full doc loan may give you access to a wider range of lenders and pricing.

A low doc loan trades some of that for flexibility when your paperwork isn't current. Because the lender has less formal information, the rate or fees can be higher. That isn't always so, and your credit history, the vehicle and any deposit all make a difference.

Look at the comparison rate as well as the interest rate. It combines the rate with most standard fees and charges, so it gives a better sense of the overall cost, although it's based on a standard loan amount and term and won't exactly match your loan.

What you can use it for

Low doc car loans are usually used for vehicles with a genuine business purpose, from new utes and vans to near-new and used vehicles that meet the lender's requirements. Some lenders also consider private sales or older vehicles, depending on your circumstances.

For vehicles used mainly for business, commercial structures such as a chattel mortgage may be worth discussing. Talk to your accountant about which structure suits your business from a tax point of view.

Before you sign

If you're approved, read the loan contract carefully. Check the repayment amount and frequency, the term, the interest rate, all fees, any balloon or residual, and what happens if you want to pay the loan out early. Make sure it matches what was discussed before you sign.

General information only

This article is general information only. It does not take your personal circumstances into account and is not personal credit, tax, legal or financial advice. Low doc criteria, pricing and documentation requirements vary between lenders, and all finance is subject to lender assessment and approval.

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