Can't prove your income? Try a Lo Doc loan

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Monday, 02 October 2006

Lo Doc loans are becoming more and more popular because they make applying for a loan so easy. A Lo Doc loan stands for low documentation. In most cases this means that instead of providing documents that prove your income you sign a declaration stating that you can afford the loan. So if banks and lenders are not checking your income are they leaving themselves wide open to future loan arrears and defaults?

One would think so but in actual fact the default and arrears rates for Lo Doc loans are really quite low. However most lenders are more strict with their lending guidelines for Lo Doc loans than with a fully verified application. Typically they will not lend as much towards the value of a property as they would with a fully verified loan. This means that lo doc customers generally need to have more equity or assets than that of a fully verified customer.

There used to be a time when lo doc loans where much more expensive in terms of interest rates to their fully verified counterparts. But once again massive popularity and competition has forced the price of lo doc loans down to the point where there is little difference between the rate of a lo doc loan compared to that of a fully verified loan.

So if lo doc loans aren't that risky to the bank and if there isn't that much difference in interest rate why bother with the hassles of proving your income to the bank? Well, many people aren't.

Interested in a lo doc loan? To make an online enquiry click here.