The Reasons Why Low Doc Business Loans Can Mean Disaster
Low doc business loans can help you when you are in financial difficulty but if you have no idea what you are doing and with whom you are doing business, you might end up regretting using this service.
We will explain what low doc business loans are and why they can have an adverse impact on your financial life and your business.
The Good Part of Low Doc Business Loans
Low doc business loans are made to be fast and easily accessible. They can help your business get rid of its debts and make way for profits by giving you the funds you need. However, there is a quality that low doc business loans possess that other types of loans or even financial services do not have.
Low doc business loans do not require as many documents or financial statements as standard loans or financial services do. They come with competitive rates and flexible loan terms. These two features alone make this loan attractive to business people.
For example: if you plan to get a low doc business loan for your small business (or maybe you are self-employed) you don’t have to present financial statements, proof of consistent income and tax returns. In other words, you have better chances of getting this business loan approved than you would with a traditional loan.
Also, if you are self-employed, the chances are that you will get rejected by traditional lenders because your documents do not support your case in getting a business loan. With low doc business loans, a lender will configure the loan depending on your financial situation (your income, your expenses, your profits, etc).
Since the loan doesn’t require many documents, you can apply for one over the phone. All you need to do is a few questions, and from there, you will get information regarding the types of low doc business loans you are eligible for.
The Dark Side of Using Low Doc Business Loans
As it is the case with any other type of loan or banking service, low doc business loans also come with some drawbacks. In fact, this kind of loan can make a heavy impact on your finances and not in a good way. These types of problems usually result from poor research or using questionable methods of getting the loan approved.
The thing with low doc business loans (or any type of low doc loan) is that almost anybody can be eligible and be approved. There are many cases in Australia where low-income families, pensioners and people who are not investors or self-employed applied and got accepted for low doc business loans.
The fact that almost any person, no matter the income or status, can apply for this loan makes this financial service attractive. Another thing that is attractive, but for the wrong reason, is that these loans are set for longer terms. However, they implode after five years because of the cost of the loans.
Another thing you should consider when using low doc business loans is the fact that you might lose a lot with this loan. For example, if you use your business property, car, house or other valuable asset as security, you can lose them in the upcoming years after you accepted this loan if you miss repayments.
This will happen because the high interest and the fee charges will make this loan unbearable in a few years time. Many people who apply for this loan realise in a couple of years (less than five) that they owe more than the loan they started with. There are many examples like these in Australia.
This means that this type of loan can never be paid off if you have the same monthly income. The chances are that if you are using a low doc business loan, you could default and when that happens, things will get worse. You will end up losing your property, and you might face bankruptcy or even legal charges.
Of course, another reason as to why some people get in trouble with low doc business loans is the fact that their broker will offer “enhanced” information to the lender so that the loan is approved. There are cases when the property used as security values more in the signed agreement than what it is really worth.
In the end, low doc business loans are not ideal if you do not have the financial power to pay them back. There are alternatives to low doc business loans that could help you during your financial troubles. Contact us today for a free consultation and assessment to find out the most suitable loan for you. Call us on 1300 886 996 or fill out our enquiry form today with no effect on your credit file.