When you are planning to construct a building, you need lots of funds. Even though most contractors receive several sponsorships, sometimes, the sponsored funds are not enough to complete the project in the way you have envisioned. For such cases, you need to take a loan from the bank or any other lender to buy a property.
The main hurdle that contractors face while taking a loan is in documentation. One will have to show the revenue plan of the project, the prospective potential of the plan’s success, higher credit points of the contractor, and so on. Failure to display of these documents will lead to cancellation of your loan request.
What is a low doc loan?
From the name itself, you can understand that a low doc loan is a type of credit one can get with minimal number of documents. Such loans are approved even if you fail to display the major papers like higher credit score, income plan, and others. These loans are usually granted to businesspersons and investors who are short of funds.
Unlike in case of normal bank loans, a low doc building loan will require limited number of documents. For your ease, here we have listed down the most important papers and proofs that you will have to submit with the loan request:
- ABN (Australian Business Number) proof
- GST registration document in case ABN is not there
- Business activity statements which will list the transactions made in the name of your business
- Tax return files of your personal income to show whether you are a genuine taxpayer or not
- A letter from your accountant saying the need of funds, its amount, and the projected success revenue of the building project
Why one needs a low documentation loan for building projects?
Before reaching any conclusion, you should know the reasons for which the low doc building loan is applied for. You have to give a reason for taking such loans in your application form.
- Shortage of funds for the building project budget
- Not having enough documents to get a proper loan from the market or bank
- Having lower credit score
- Not having proper list of banking transactions of the business account
- Early approval of the loan
Benefits of having a low doc loan
If you think that a low doc building loan is only beneficial for those not having enough documents to procure, you are seeing only one face of the coin. To be honest, a low doc loan has several benefits that every investor or businessperson must know before applying for one.
- Funds can be arranged real fast as a low doc loan is approved within 3 to 4 working days.
- One won’t have to produce all the documents required for a traditional business loan.
- Low doc loans have flexible repayment plans which you can choose as per your convenience.
- The interest rates on the low doc loans are available in both the fixed and variable form.
- With a low doc loan, you won’t have to worry about keeping anything as a mortgage.
- You can avail a low doc building loan even if you have poor credit scores.
Even though the low doc building loan is beneficial in many terms, there are certain risks which are associated with the credit type. First of all, the interest rates of such loans are quite high. Secondly, the repayment duration is not long and you won’t be able to extend it. So make sure, you must read the terms and conditions of the lender before you take a low doc building loan.
