Low doc personal loans for the self-employed

ALASDAIR DUNCAN
Low doc personal loans can be one option for self-employed people seeking to borrow money. Here, we’ll take you through what they are, what you’ll need to apply for one, and some things to consider before applying.

Running your own business can be both personally and professionally fulfilling ‒ it can allow you to be your own boss, set your own agenda, and see your creation grow and prosper over time. It also comes with its own unique challenges, and a major one of these is the fact that getting approval for a personal loan can be a steeper hurdle to clear than for full-time employees..

If you’re self-employed and you wish to apply for a personal loan, you may be concerned that you do not have the paperwork that lenders typically wish to see. In this situation, applying for a low documentation or ‘low doc’ personal loan may be a suitable option for you. In this article, we answer:

What is a low doc personal loan?

A low doc or ‘low documentation’ personal loan is a loan that requires the borrower to produce less documentation than would typically be required to take out a standard personal loan. They exist for people who earn an income and wish to borrow funds, but who may not be able to provide employment-related documentation such as Pay As You Go payslips or group certificates. Low doc personal loans might be considered by tradies, freelancers, investors, contract workers and people who are casually employed, as examples.

Who can apply for a low doc personal loan?

Low doc personal loans are typically aimed at self-employed people and those who run their own businesses. While each individual lender will have different eligibility criteria, many lenders require that you have an Australian Business Number, or ABN. In addition to low doc personal loans, many lenders offer low doc home loans.

What do you need to apply for a low doc personal loan?

The requirements to apply for a loan can differ between individual lenders. Generally speaking, though, a lender will want to see as much information as possible about your income and your business in order to build a clear and accurate picture of your finances. This could include:

  • Bank statements from your personal or business accounts, as proof of income
  • Evidence that you have been registered for GST for at least 12 months
  • Business Activity Statements (BAS) for the past 12 months
  • Your tax returns for the past two years from the Australian Tax Office (ATO)
  • Information about any assets you own, such as investment properties
  • Information about personal debts

If you are unable to provide a business activity statement, some lenders may also accept a signed letter from a qualified accountant who has knowledge of your financial circumstances. This letter must contain details such as how long the accountant has acted on your behalf, and details of your current income.

Some lenders will provide what’s known as a ‘low doc declaration’, which is a specific form for an accountant to complete in place of writing a letter. Whether you will be required to provide a signed accountant’s letter or a low doc declaration depends on lender requirements.

Are low doc loans harder to get after COVID-19?

The COVID-19 pandemic and the ensuing lockdowns and travel restrictions have had a major impact on Australian society, and many small business owners are feeling the effects. In the wake of the pandemic, some lenders may be more risk averse, and willing to lend lower amounts than before at higher interest rates. Likewise, it may be the case that a lender will want to see a statement outlining the ways in which COVID-19 has or has not impacted the running of your business before considering you for a loan.

Where can you get a low doc personal loan?

Most major banks and financial institutions will offer low doc personal loans to self-employed people, as long as the borrower meets their eligibility criteria. You might consider comparing your loan options online, or consulting with a personal loan broker to find a loan that is suitable for your particular needs and situation. Major banks currently offering low doc personal loans include ANZ, Bankwest, Bank of Melbourne, BankSA, Bendigo Bank, Citibank, CommBank, NAB, St. George and Westpac.

What should you consider before applying for a low doc loan?

There are a number of factors to consider before deciding whether to apply for a loc doc personal loan. It is worth keeping in mind the interest rate of the loan, the fees and charges attached, the repayment terms, and whether the loan itself is secured or unsecured, as well as your own credit history.

Interest rates

Personal loans come with fixed or variable interest rates, with the former remaining stable over the term of the loan, and the latter being subject to going up or down. Whichever you choose, it is important to keep in mind that lenders tend to consider low doc loans riskier than other kinds of loans, so the interest rate may well be higher than with a standard loan.

Fees and charges

Before signing up for a loan, it is important to understand any attached fees and charges. Some loans have one-off application fees, as well as monthly or annual ones. Variable rate loans typically come with fees for early repayment, also.

Application process

It can be relatively easy to apply for a low doc personal loan. As well as asking for your ABN, lender requirements can include asking for specific details about your income and recent tax returns. This type of information is evidence that supports your capacity to repay a loan, even if there’s less paperwork overall. Before you apply for any loan, including a low doc loan, it’s important to carefully consider your capacity to repay the loan, plus the interest that will apply. In addition to late fees, not being able to pay back your loan on time could negatively impact your credit score and future borrowing capacity, making it more difficult for you to borrow in the longer term. Depending on your borrowing capacity and circumstances, you could consider taking out a personal loan with a guarantor if you are self-employed.

Repayment terms

The nature of being self-employed means that you might earn more some weeks than others. If your income varies,  it’s important to ask a potential lender whether they offer flexible repayment terms. This could be a potential safeguard for you against falling behind in your loan repayments. Canstar has a Personal Loan Calculator you can use to help you calculate potential personal loan repayments.

Secured vs unsecured loans

Loans can be either secured or unsecured. A secured loan requires you to provide an asset, such as a car, as a form of security that the lender may sell if you are unable to meet your repayments. An unsecured loan does not require this, but in the event you are unable to meet your repayments, your lender may take you to court.

Secured loans tend to carry lower interest rates than unsecured loans, as they are generally less risky for the lender. If you are confident in your ability to make your repayments, this may be worth keeping in mind.

Credit history

Your own credit history can affect the type of loan that lenders are willing to offer you. If you have a high credit score, lenders may be willing to offer you lower interest rates than if your credit score is low, as they see you as less of a risk. Similarly, some lenders have stricter requirements than others with regards to defaults on your credit history ‒ some will not agree to lend to you if your history shows defaults within a certain period of time, and some may not lend to you at all in these circumstances.

What responsibilities do personal loan lenders have?

Personal loan lenders are bound to abide by Australia’s responsible lending laws. The National Consumer Protection Act 2009 puts the responsibility on lenders to make sure that any loan product they offer is suitable for the borrower. The legislation requires them to make ‘reasonable inquiries’ about a potential borrower’s requirements and objectives, and take steps to verify their financial situation.

By the provisions of the Act, lenders must only give a loan if they think the amount is suitable for the borrower, and they must not loan an amount greater than they reasonably think that a borrower will be able to pay back.

What can you do if you’re experiencing financial difficulty?

The COVID-19 pandemic and its ongoing effects have put a great deal of strain on many small business owners around Australia. If you are experiencing financial difficulty at this time, or if your financial situation is causing you feelings of stress and uncertainty, you can contact a financial counsellor for help.

Financial counselling services are typically free, confidential and non-judgemental, and they are funded by the government. A financial counsellor can help you negotiate with creditors like banks and lenders, utility providers, landlords and the ATO, and may be able to direct you towards financial support that may be available.

You can call the National Debt Helpline on 1800 007 007 to speak with a financial counsellor for free.

Cover image source: Carballo/Shutterstock.com


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This content was reviewed by Sub Editor Jacqueline Belesky and Finance and Lifestyle Editor Shay Waraker as part of our fact-checking process.


Alasdair has more than 15 years of experience as a journalist, and he specialises in property and lifestyle topics for Canstar. He has a Bachelor of Laws (Honours) from the University of Queensland and has lectured at QUT. His work has appeared in outlets including Pedestrian.TV, the ABC and Junkee.

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