You Shouldn’t Lie On Your Personal Loan Application

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Lying on a loan application is far from harmless and is considered fraud. While it can be tempting to misrepresent your income, employment or assets to seem more appealing to lenders, you could face serious consequences.

You can lose your loan funds, which means you either never receive them or have to repay what you borrowed immediately. But you can also face serious legal consequences. Always be honest when you apply for a personal loan — or any form of credit — and update the lender as soon as possible if there are any changes to your employment or income.

Lying on a personal loan may lead to rejection or worse

You could face serious consequences if you lie on a loan application. Whether it’s providing an incorrect salary or falsifying documents, you could lose your loan, tarnish your financial health and potentially face criminal consequences.

Financial consequences

• Loan cancellation: You could lose your loan if the lender discovers that you falsified the contents of your application. The company may cancel the loan before disbursement, or if you’ve already received the funds, you may have to repay the full debt immediately.
• Financial hardship: If you lie to qualify for a loan you ordinarily wouldn’t, you could end up with a debt that you cannot repay. Missing payments will lead to damage to your credit score and loan default.

Criminal consequences

• Jail time: Going to prison for lying on an application is rare, but it does happen. There have been many cases of people being sentenced to prison for providing false information to lenders. These typically follow larger criminal acts — like identity theft — but you are still putting yourself at risk.
• Fines and legal fees: Even if you don’t face jail time, your lender may sue you for repayment. Fines and legal fees will be added to the immediate repayment of the funds you borrowed.

Information that lenders typically verify

To get a personal loan, you will need to provide personal and financial information. Lenders may choose to verify anything you submit, including:

• Income and current debts
• Employer and employment status
• Age, address and residency status
• Credit score and credit history
• Collateral for secured loans

Your application and any supporting documentation will be checked for inconsistencies and inaccuracies. Some application forms also detect whether a document has been altered, modified or edited.

Common lies on a loan application

Your income, debt, employment and other information must be accurate when you submit a personal loan application. Any exaggeration can be considered fraud.

• Misrepresenting income: Some applicants may be tempted to inflate their annual income to qualify for more funding or a lower interest rate. Income is always verified and will require significant documentation.
• Minimizing debt: Lenders want to see a low debt-to-income ratio (DTI), ideally below 36 percent. Most likely, your debts will be reviewed during a credit pull. If you are asked to provide this information, report it accurately.
• False employment: Applicants may claim one or multiple false jobs to make themselves appear more financially stable.
• Inaccurate residency: Your lender will verify your residency via your driver’s license or other government-issued ID. It will also check your Social Security number or Tax Identification number to confirm your identity.
• Misrepresented purpose: There are often requirements regarding how a loan may be used. For example, you generally cannot use a personal loan for college expenses. If you violate the lender’s terms, you may be required to repay your funds immediately.

How to strengthen your loan application without lying

Beyond avoiding potential criminal charges, honesty ensures that you only borrow what you’re capable of repaying. Lenders have these policies in place to prevent you from overextending your finances.

There are a few ways you can strengthen your loan application, though it may mean waiting to borrow until you’re in a better financial position.

• Improve your credit. Your credit score is one of the most critical aspects lenders consider. A positive payment history, low credit utilization ratio and a strong credit mix are parts of your credit score you can work to increase.
• Pay down other debts. Not only will paying off your debts lower your DTI, it will also improve your credit utilization ratio and boost your credit score.
• Increase your income. It may be easier said than done, but boosting your income can help you qualify for a loan. You may pick up a side hustle or ask for a raise at work.
• Find a co-signer. Adding a creditworthy co-signer or co-borrower to your application may improve your chances of being approved. However, the other person will need to qualify as well — and should know the risks of acting as a co-signer before they apply.

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If these options aren’t feasible, you may want to consider a personal loan alternative. There are bad credit loans and credit cards that may be easier to qualify for, and while these may not have the best terms, they can bridge gaps in your budget while you work on strengthening your overall financial situation.

Bottom line

Honesty is the best policy, especially when it comes to borrowing money. Lying on a loan application may get you what you want in the short term, but it has the potential for severe and long-term consequences. A lender’s requirements for borrowing money are in place to protect them from losing money and to protect you from landing in a financial situation you can’t manage.