When searching for the perfect car loan, you may see mentions of “low doc car loans.” But what are they and how are they different from the usual car loan? In this article, we discuss the difference between low doc and full doc car loans. 

Read on to see which one fits your car loan needs better. 

Low doc car loan vs full doc car loan 

If you need a vehicle for your business but do not have the right documents, a low doc car loan may be the ideal finance option. With a low doc car loan, you don’t have to provide extensive financial documentation. Take note, this loan is available only if you are buying a vehicle used mostly for work or business. 

This type of car loan is great for sole traders, self-employed individuals, entrepreneurs, and small business owners. A low doc car loan is also beneficial for those who may not have regular income or can’t provide tax statements, proof of income, and similar documents. 

Meanwhile, a full doc car loan is a standard car loan that requires standard documentation such as proof of income, tax statements, assets and liabilities, credit rating, financial history, and more. For a full documentation loan, you will have more discretion when it comes to the use of the vehicle you are financing. You can apply for a business car loan or a personal-use car loan depending on your needs. 

  Low doc car loan Full doc car loan
Purpose The car or vehicle you purchase must be used mostly for business or work. The car or vehicle purchased can be used for personal and/or business purposes.
Requirements You do not need to provide extensive bank statements or financial history. The documentation you must provide may include:  Identification  Australian Business Number (ABN)  Car value and details You must provide extensive information about your current financial situation. Some documents you may need are:  Identification  Proof of income  Bank statements  Credit score and history  Proof of assets and liabilities  Information about the car and insurance
Best suited for This type of car loan is great for small business owners, sole traders, entrepreneurs, freelancers, and self-employed people. Anyone who has the required documents and wants to take advantage of standard car loan features and benefits.

What are the benefits of a low doc car loan? 

In addition to requiring less financial documentation, low doc car loans provide useful benefits such as: 

  • A simpler application process. Since you do not have to provide substantial documentation, the application process is more straightforward. Your loan application may also be settled quicker because there are fewer documents to go through. 
  • Get the funds for your business car sooner. Due to the quick processing time, you may be able to finance your purchase sooner
  • Low doc car loans can be used for more than business purposes. In certain cases, you can use a car purchased through a low doc loan for some personal matters too, however, the requirement is usually that the ‘majority’ of the vehicle use must be for business use.
  • Claim tax benefits. The loan interest payments and depreciation of the vehicle may be tax deductible depending on your eligibility. 

What are the drawbacks of a low doc car loan? 

Low doc car loans may come with more expensive fees and interest rates compared to a standard car loan. Lenders may see low doc loans as riskier and compensate accordingly.  

There may also be restrictions with low doc loans that are not found in the typical car loans. The lack of flexibility may make a low doc car loan a less desirable option. 

What are the benefits of a full doc car loan? 

Compared to a low doc car loan, a full doc loan provides borrowers with a lot more flexibility and more loan options. When taking out a full doc car loan, you could see the following: 

  • Better interest rates compared to low doc loans. Standard car loans are seen as less risky compared to a low doc loan. Lenders may offer lower interest rates and fees as a result. 
  • More loan features are available. Loan features like early payment, balloon payment, and the like may be offered to make repayments more manageable. 
  • More full doc loans. There are more standard car loans out there giving you a plethora of options. You can shop around and compare rates to get a better deal. 

What are the drawbacks of a full doc car loan? 

Some disadvantages of a full doc car loan are the number of requirements and the longer loan processing time. If you are in a hurry to get your car purchase funded, a full doc car loan may not be the best option for you. 

Find the right car loan with carloans.com.au  

Need a good car loan? Get in touch with carloans.com.au today and we can help you find the perfect loan for you. Call 1300 889 669 or apply for a loan online