Getting access to financial products such as loans and credit cards are usually really hard for someone with no financial track record. Banks won’t even consider the option and those who do will ask for extensive paperwork about your assets to make sure you are able to pay them back. This is where loan agency like Maxiron Capital usually step in by offering a low doc loan or no doc loans. You might be wondering about the nature of such a product and it’s actually a very simple one to understand even with no notions of financing or business knowledge.
Low doc loan or no doc loans are financial instruments that provide funding to people who lack the regular verification requirements of a person with established financial stability. While banks do grant these types of loans they make the process really difficult by asking income declaration signed by a certified accountant and other documents such as tax returns. Loan agencies don’t put you through all the hassle of providing documentation, but their interest rates tend to be a bit higher and they lend less money than banks.
The Targeted Audience of These Financial Instruments
Low doc loans and No doc loans are offered to self-employed persons and people with startup ideas that are looking to fund their business initiatives. While banks see these persons as risks factors on their funding structures, loan agencies seem them as a striving market and they are more than willing to work with most of them.
A bank doesn’t use the formulaic nomenclature to refer to the product based on the nature of it since they do request a heavy number of financial statements and tax-related information to grant what is essentially a basic loan.
Agencies work the process within the legal means of the Australian financial system. They ask potential borrowers to state an estimated projection of their income along a declaration form and that’s it, some service providers go as far as simply offering the money with no questions asked, although they will require your personal information to have a way to contact you and keep an open line of communication should something affect the payment schedule.
What’s the benefit of using Low doc loans or No doc loans with agencies?
For the user, it means access to a financial instrument that was previously offered just by banks and under restricted conditions. Young people or persons with low to nonexistent experience dealing with the banking system has very little chance to access funding for their initiatives, mainly because most of these people could not provide evidence to a steady income.
Lack of income means unreliable information about tax returns and the dealings tied to the bureaucratic machine of tax management of the Australian government such as large deductions based on depreciation, unforeseen personal circumstances or even the distribution of assets and valuables with family members.
Tanks to the regulations issued by the Australian government, working with loan agencies can give you access to funding within legal means without the hassle that comes with paperwork. For low doc loans, most agencies ask for a valid Australian Business Number (ABN) if you are a business owner and for you to be registered on the Goods and Services Tax office (GST). In most cases, you’ll just be asked for a basic Income Declaration Form and that will be it.
Why Loan Agencies offer this type of Financial Product?
The answer is a bit more complex to this one: since 2008 a financial crisis in the USA affected loan businesses all over the world. While the crisis was centered just in their real estate market the backlash of the crisis was felt all across the financial system in the planet. Up until that point banks were lending money to people that were not able to provide proof of income. This situation got these institutions into deep financial crisis when they tried to collect what they were owed.
While the governments of the world tried their best to solve the situation by aiding both sides of the conflict, it made financial institutions wary of lending money without backing up the borrower’s ability to pay them back. Still, some entrepreneurs were aware of the demand for these types of financial product to exists and set their shop apart by lending money under certain conditions without all the paperwork entailed to it.
This generated another source of conflict since debtors where fighting a snowball of interests on debts that they could never repay totally without going broke. The Australian government had to step in and by 2012 most of the agencies that wished to remain on business could do so by following a specific set of regulations to protect the users of shady deals and false advertising. The system has been working with no issues to this date but just by drawing a fine line on a very gray area of the legal system that allows these agencies to collect their money by any means necessary if the user refuses payment or is unable to provide it.