Applying for almost any loan these days requires a fair modicum of paperwork, as well as a pretty strong track record of income and savings. But what if you’re self-employed, your income ebbs and flows, or you don’t really have that history? That’s where no or low doc car loans come in.
What is a low-doc car loan?
“Low doc” essentially just means a “low documentation” car loan. Often used by people who are self-employed or those who can’t provide a strong track record of steady income, low-doc car loans could demand a bit more from the consumer, yet require less paperwork.
The specific details vary from lender to lender, but generally, you could be paying a higher interest rate than other types of car loans, as you are likely determined as a bigger risk by the lender.
There are various commonalities with standard full-doc car loans, however. You often get a choice between fixed and variable loans, and lenders could let you purchase a used vehicle, provided it’s roadworthy.
Who are low-doc car loans for?
Low-doc loans are designed for anyone with reliable income who struggles to meet standard paperwork requirements, offering flexibility beyond traditional employment categories.
Freelancers and contractors whose earnings vary month to month and who may not have steady payslips or formal employment records.
Gig economy workers including rideshare drivers, delivery couriers, online sellers, and others earning through app-based or platform work, where income is considered irregular by mainstream lenders.
Small business owners who reinvest revenue, minimise taxable income, or prefer verifying earnings through BAS, bank statements, or profit-and-loss summaries instead of full tax returns.
People with non-traditional income or work history including those returning to work, managing multiple side hustles, earning overseas income, or holding inconsistent employment histories that don’t align with conventional lending criteria.
Requirements for a low-doc car loan
Even though you may not need as much evidence of income, you could still require a signed document from your accountant or other income professional to say you can pay off the loan. Typically, you'll also be required to provide:
- BAS for the self-employed or employment verification
- Information on any current debts to show good credit history
- Proof of identity
- Proof of income
- Proof of address
- Bank statements
Savings.com.au's two cents
Low doc car loans sound fancy, but they are essentially just a subset of car loans where you may not need a steady income history. Most likely of use to small business owners - especially ones just starting out - a low doc loan could be the ticket to getting a set of wheels and being able to grow your business further.
However, this could come at the expense of the interest rate, which might be higher than other types of car loans. Keep in mind the lowest fixed car loans over five years are usually around the 5% p.a. mark, so it could be useful to use that as a yardstick and go from there.
Pros and cons of a low-doc car loan
Pros
Flexible documentation
Faster approval times
Accessible for self-employed and gig workers
Can leverage alternative financial evidence
Cons
Higher interest rates
Lower borrowing power
Stricter lending conditions
Limited lender options
What other options do I have?
If you just ‘CBF’ with paperwork, then you might be ‘SOL’ (s..t outta luck), as like with most applications, car loans require a fair bit of it. However, if you’re a small business owner or someone with a short or bad credit history, you might have a few options up your sleeve. Options could include:
Chattel Mortgage: If you’ve got a business, a chattel mortgage is essentially a secured car loan for it. They also usually allow you to claim GST and interest paid back on tax, as well as depreciation.
Hire Purchase: You are essentially agreeing to ‘rent’ the vehicle from the financier for a set period, after which they sign the title over to you, usually involving some type of balloon payment. You usually also have the option of purchasing at any time. Could also come with tax/GST benefits.
Personal/Unsecured Loan: A personal or unsecured loan doesn’t use the car as collateral in case you default on the loan. As this is seen as riskier by the financier, you likely face higher interest rates than if you secured the loan. This rate could be higher still if you have a poor credit history.
In the business realm, there are quite a few options you have. And this doesn’t just extend to vehicles - you can also often finance equipment and machinery. However, as always, keep an eye on the specific terms of the loan, and the interest rates and fees.
