Short answer
A low doc loan lets you show your income with fewer documents than a standard loan, such as BAS, business bank statements or an accountant's declaration instead of full tax returns. They're mainly used by self-employed borrowers. Moneysmart notes they usually have higher interest rates, and some have terms that limit you, so check first whether a standard loan is possible.
How is a low doc loan different?
Moneysmart describes a low doc loan as one that needs less paperwork to prove your income, assets and debts than a standard loan. It's not a "no doc" loan: the lender still has to take reasonable steps to check you can afford it.
| Standard (full doc) | Low doc (alt doc) | |
|---|---|---|
| How income is shown | Tax returns and notices of assessment (plus business financials for a company or trust) | BAS, business bank statements or an accountant's declaration |
| Interest rate | Standard rates | Usually higher |
| Who it suits | Borrowers with up-to-date tax returns that show their income | Self-employed borrowers whose tax returns are behind or don't yet reflect their income |
Who uses low doc loans?
- Sole traders and contractors whose latest tax return isn't lodged yet
- Business owners whose income has grown since their last return
- Self-employed borrowers with a shorter trading history
What documents do lenders ask for?
Each lender sets its own list. ASIC's 2014 review of low doc lending found lenders used an accountant's statement, BAS or business bank statements covering six to twelve months to check income, and checked that the ABN had been registered for at least six months, along with GST registration where it applied. Typical documents today include:
- your ABN details, and GST registration if your GST turnover is $75,000 or more (when the ATO requires it)
- BAS for recent quarters
- business bank statements
- an accountant's letter or declaration of your income
- your ID, personal bank statements and details of any debts
What does it cost?
Low doc loans usually have higher interest rates than standard loans. Compare loans using the comparison rate, which combines the interest rate and most fees into one figure, shown on each loan's key facts sheet. Ask about any extra fees, and whether lenders mortgage insurance applies to your deposit size.
Is there an alternative?
- Lodge your tax return first. If it shows enough income, a standard loan may be possible, sometimes with a lender that accepts 12 months of trading.
- Count earlier work in the same field. Some lenders look at your total time in the same line of work, not just your time on an ABN.
- Start low doc, refinance later. Once your returns are lodged, refinancing to a standard loan may be possible, subject to approval and switching costs.
How MoneyGenie helps
- Checks first whether a standard (full doc) loan is possible with the records you already have.
- If low doc suits you better, compares the options on our panel, including the comparison rate and fees.
- Works with your accountant on the documents each lender needs.
Nabita compares options from MoneyGenie's panel of 35+ lenders, tells you upfront which are realistic for your situation, and handles the application with you through to settlement. Our service is generally at no cost to you, as we're paid a commission by the lender, which we disclose to you upfront. Details are in our Credit Guide, available on request. Talk to Nabita: call 040 110 1608 or send an enquiry.
Call 040 110 1608 Send an enquiryLast reviewed by Nabita, mortgage broker, MoneyGenie Finance.
Official sources
Frequently asked questions
Do low doc loans still check my income?
Yes. Lenders must take reasonable steps to verify your financial situation under the responsible lending rules. Low doc loans use different documents, such as BAS, business bank statements or an accountant's declaration, not none.
Are low doc loans more expensive?
Usually. Moneysmart notes low doc loans usually have higher interest rates. Compare the comparison rate, which combines the interest rate and most fees, on each loan's key facts sheet.
Can I switch from a low doc loan to a standard loan later?
Often, yes. Once your tax returns are lodged and show your income, refinancing to a standard loan may be possible, subject to the new lender's approval and any costs of switching.
The rules and figures in this guide were checked against the official sources above on the review date. Government rules and lender policies change, so check your own situation with us or the relevant authority before acting.