Who is Eligible for a Low Doc Car Loan?

To be eligible for a low doc car loan you need to meet certain criteria set by individual lenders and financial institutions. This article will explain what a low doc car loan is and who is eligible for a low doc car loan. Finally, we will provide insights into the most effective way to apply for a low doc car loan.

What is a Low Doc Car Loan?

Low doc car finance is a type of business vehicle loan. The vehicle is usually used as security against the loan. The main difference is that this type of business loan does not require full up-to-date business financials, such as tax returns. For this reason, low doc loans are for ABN holders who may not have traditional income documentation readily available or who have non-standard income sources. However, lenders will require some proof of income to demonstrate that you have affordability to pay the car loan.

Who is Eligible for a Low Doc Car Loan?

Below are the common requirements to be eligible for a low doc car loan.

1. ABN

Your business must have a current operational Australian Business Number (ABN). In fact, most lenders require your ABN to be over 6 months old to be eligible for low doc car finance. Furthermore, the duration of your ABN and its GST status are key factors in determining which lenders you can approach for a low doc car loan. If you have GST registration it signals to lenders that your business has an annual turnover exceeding $75,000, which can enhance your credibility. Additionally, a longer operational history offers lenders reassurance that your business is operating successfully, rather than a new startup.

2. Business Use

The vehicle being purchased must be used for business purposes. Business use refers to utilizing a vehicle primarily for activities that are directly related to the operation of a business. This means that the vehicle is employed in tasks that contribute to generating income or facilitating the business's day-to-day operations. Below are some examples of business use.

1. Delivery Vehicles: A bakery might use a van to deliver goods to customers, ensuring timely distribution of products. The van is essential for fulfilling customer orders, making it a business use.
2. Service Vehicles: A plumbing company might purchase a truck to transport tools and equipment to job sites. The vehicle is necessary for the plumbers to perform their services, categorizing it as business use.
3. Client Transport: A real estate agency may buy a car to drive clients to property viewings. The vehicle helps in providing a professional service, thereby supporting the business.
4. Sales Vehicles: A sales representative for a wholesale company might need a vehicle to visit clients and showcase products. The car is used in direct business activities, making it a business asset.
5. Mobile Business: A food truck is a classic example of a vehicle for business use, as it serves as the primary location for the business operations, directly generating revenue.

In all these examples, the vehicle plays a crucial role in enabling the business to function, making it eligible for a low doc car loan intended for business use.

3. Documentation

When applying for a low doc car loan, the documentation requirements are generally divided into two categories. Firstly essential documents and secondly proof of income. Essential documents are required for the basic processing of the loan application and to verify your identity.

• Identity Verification: Driver’s License is the primary form of photo identification. A secondary form of identification is usually your Medicare card.
• Signed Privacy Form: This document gives lenders permission to access and check your credit file. It’s a standard requirement in the loan application process.
• Vehicle Invoice: The vehicle being purchased will typically serve as security for the loan. Lenders will require an invoice stating purchase price and the car details. This could include its make, model, age, and condition and well as the Vehicle Identification Number (VIN).
• Property Rates Notice (if applicable): If you own property, providing a rates notice can help you secure a more competitive interest rate, as it demonstrates additional financial stability.

4. Proof of Income

Low doc loans require less documentation compared to traditional loans. However, you will still need to provide some form of documentation to support your income and financial situation. These documents demonstrate your ability to repay the loan.

• Bank Statements: Recent bank statements showing regular income deposits can provide evidence of your financial capacity.
• Accountant’s Letter: A letter from your accountant confirming your income and the financial health of your business can be a valuable piece of documentation, especially for self-employed individuals.
• Business Activity Statements (BAS): Providing BAS can further validate your business’s income and financial standing, giving lenders confidence in your ability to meet loan repayments.

These documents help lenders assess your creditworthiness and determine the loan amount and interest rate you may qualify for, even when you cannot provide the full range of traditional financial documents.

There is also an option to get a car loan with no proof of income using a No Doc Car Loan option.

5. Good Credit History

Lenders will typically assess your credit history and credit score to determine your creditworthiness. Some low doc lenders are more flexible with credit history requirements compared to traditional lenders. However, having a good credit score can improve your chances of approval and may help you secure more favorable loan terms. Find out more about how your credit score affects your business vehicle finance approval.

6. Deposit / Loan-to-Value Ratio (LVR)

Lenders may consider the loan-to-value ratio. That is, the ratio of the loan amount to the value of the car. In effect, if you have a lower LVR, you are borrowing a smaller percentage of the car's value. Hence, a lower LVR can improve your chances of an approval and may lead to better loan terms. Generally the easiest way to lower a LVR is by paying a deposit. While not all lenders require a deposit some may insist on a 10 to 20% depending on your specific circumstances.

Are you eligible for a Low Doc Car Loan? Find out How to Apply!

It's important to note that the eligibility criteria vary between lenders. In addition, the eligibility criteria are constantly updated and can change on a weekly basis. Obviously, this is where an accomplished and professional finance brokerage can help! There are several benefits of using a finance broker to finance business vehicles.

At AAA Finance and Insurance, we have a team of highly experienced finance brokers to navigate the sea of lenders on your behalf. Our job is to find the lender that suits your circumstances at the most competitive rate on the market. In order to provide the best option for your circumstances, we shop around and compare loan offers from different financial institutions. At AAA Finance, we will save you both time and money. Call 07 5493 1222 to experience the AAA difference today!