What does the term "no-doc loan" mean?

The term "no-doc loan" refers to a type of loan that requires little to no documentation of a borrower’s income or assets. This kind of loan is designed to streamline the lending process for borrowers who may have difficulty providing the extensive documentation typically required for a mortgage. For instance, self-employed individuals or those with irregular income might find traditional loans challenging because they usually need to prove their financial status through various documents like tax returns, pay stubs, and bank statements. The no-doc loan alleviates this burden, allowing lenders to approve loans based on less conventional means, often relying on the borrower's creditworthiness instead.

This approach can benefit those needing to access funds quickly or those who may not have formal documentation readily available. The absence of stringent documentation does carry some risks for lenders, hence these loans often come with higher interest rates to compensate for the increased risk.