Some Low Doc Loans that were written a year ago, or even six months ago are just not able to be written today.

As well as tightening of credit policy, mortgage insurers such as GE and QBE have also tightened and to top it off some of the major banks are now credit scoring.

So what is the answer? The general rule is your first shot is your best shot. Low Doc Loans without BAS are still available. Make sure you are aware of what most lenders are requiring.  As a guide, minimum two years ABN, registered for gst, clean credit, purpose of the extra funds outlined, and good repayment history. Be aware also, that once a loan has been to a lender and it has been knocked back, it may be harder to get it approved the second time around with a different lender due to credit scoring.

In summary, even though credit for low doc loans is more difficult,  low doc loans that satisfy the above criteria do have more chance of being approved. Now, more than ever, it pays to get it right the first time.

The security property for the low doc business loan must be in a major metropolitan area.

RBA interest rates are normally set when the bank meets on the first Tuesday of each month, except January.

2009

In 2009, at the RBA meetings, the bank has set the rates as follows:-

RBA interest rates for 2009

• Tuesday, 3 February 2009 rates        decrease 1%
• Tuesday, 3 March 2009                    No change
• Tuesday, 7 April 2009 rates              decrease .25%
• Tuesday, 5 May 2009                       No change
• Tuesday, 2 June 2009                       No change
• Tuesday, 7 July 2009                        No change
• Tuesday, 4 August 2009                    No change
• Tuesday, 1 September 2009              No change
• Tuesday, 6 October 2009 rates          increase .25%
• Tuesday, 3 November 2009 rates       increase .25%
• Tuesday, 1 December 2009 rates       increase .25%

At the RBA meetings, when they move their rates, the variable rates for low doc loans normally move as well. Having said that, the major banks can, and do move their rates when and how much they want.

As a guide, and a guide only, you can expect the variable rate for most low doc loans to sit between 2 and 2.5% above the current RBA cash rate target.

2010

RBA interest rates for 2010

• Tuesday, 2 February 2010 rates on hold
• Tuesday, 2 March 2010 rates       increase .25%
• Tuesday, 6 April 2010 rates          increase .25%
• Tuesday, 4 May 2010 rates          increase .25%
• Tuesday, 1 June 2010                  No change
• Tuesday, 6 July 2010                   No change
• Tuesday, 3 August 2010               No change
• Tuesday, 2 September 2010         No change

The current RBA cash rate target is 4.5%

Responsible lending under the proposed National Consumer Credit Protection Bill 2009 (NCCP) is designed to ensure that consumers are not provided or suggested unsuitable credit for their circumstances.

In early October, Senator Joe Ludwig, Special Minister of State, announced proposed reforms to the Privacy Act and Regulations. An exposure draft of the legislation will not be available until early 2010

The proposed reforms introduce “positive” credit reporting.

Introduction of five “positive” datasets in an individual’s credit report file would enable a more comprehensive assessment of a person’s credit risk. The “positive” datasets are:

1/ type of each credit account opened (e.g. mortgage, credit card, personal loan);

2/ date on which each credit account was opened;

3/ current limit of each open credit account;

4/ date on which each credit account was closed;

5/ credit repayment history, which will include whether in the past two years the individual has met repayment obligations.

Until responsible lending obligations under the NCCP Bill begin in January, 2011, credit repayment history data won’t be available.

However, repayment history may be reported from April 2010.

At the moment credit reporting is “negative”, therefore more limited, eg, it only includes information about any applications for credit and overdue accounts (defaults) etc.

For credit providers, the changes should mean there is more information available for the assessment of a consumer’s financial situation and thus meet responsible lending obligations. However, it may also mean some consumers are refused credit or are offered less.

The above is information only, which is based on a draft of the legislation. It is for general information only and should not be relied on as specific advice for your particular circumstances or as a substitute for professional advice.

However, Low Doc loans without BAS are still available at or near home loan rates. If you are being quoted an investment interest rate that doesn’t begin with 5. something percent you may be paying too much. Generally, to purchase at the 80% mark, you will need clean credit, be registered for GST, it is preferable to have an ABN that has been registered for at least 2 years, and the residential property should be in a major area.

Of course all of the low doc loans applications are subject to a particular lender’s credit criteria.

As a footnote to the above, CBA are now requiring BAS statements with their 80% low doc loans. There is still alternative low doc finance out there at 80% for both purchases and refinances that do not need BAS.

Further effective 24 September 2009

All RAMS Low Doc loans applications are to be supported by the following:-

1. Business Activity Statements (BAS) for the past 12 months and ATO Lodgement Reference Number AND
2. The last 3 months account statements evidencing payment of tax as advised on the BAS.

As a footnote to the above, RAMS and many of the major banks are now requiring BAS statements with their low doc loans. With a requirement for BAS is this really a low doc loan? There are still alternative low doc lenders out there at 80% for both refinances and purchases that do not need BAS.