Lying on a personal loan application is a bad idea

Lying on a loan application may seem harmless, but even if a lender does not verify all information, it is still considered fraud. While it may be tempting to misrepresent your income, employment, or assets to appear more attractive to lenders, you could face serious consequences.

Not only could you lose the money you borrowed, meaning you may never see it again or have to pay it back immediately, but you could also face serious legal consequences. Always be honest when applying for a personal loan (or any other form of credit) and inform the lender as soon as possible if there are any changes in your employment or income.

Lying on a personal loan can lead to rejection or worse

Knowingly providing false information on a loan application is considered fraud and is a criminal offense. For example, giving an incorrect salary or falsifying documents could be considered lying – and could have serious consequences for you.

Non-legal consequences

You could lose your loan. The company can cancel the loan, and if it does not cancel the loan, you may have to immediately repay the loan money you received if the lender finds out that you made a misrepresentation.

Your credit score and ability to take out loans in the future may also be affected. Even if you don’t get caught, you’re still harming yourself. You may be left with a huge debt that you cannot repay. Missing payments will lead to a lower credit score and default. It won’t be long before that debt affects other areas of your life, such as your ability to work and maintain a stable home.

Criminal consequences

Going to jail for lying on an application is rare, but it does happen. There have been many cases where people have been sentenced to prison for providing false information to lenders. These typically follow larger criminal acts – such as identity theft – but you are still at risk of jail time.

Even if you are not sentenced to prison, you will still face the consequences. Fines and legal fees are added to the immediate repayment of the borrowed money.

Information that lenders typically verify

To get a personal loan, you must provide various details. Lenders may choose to verify anything you submit, including:

• Income and current debts.
• Employer and employment status.
• Age, address and residence status.
• Credit score and credit history.

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

Common lies on a loan application

When you submit a personal loan application, your income, debts, employment and other details must be correct. Any exaggeration may be considered fraud.

• Misrepresentation of income: Income is an area that can be tempting to fake. Applicants can increase their annual income in an effort to qualify for more financing or a lower interest rate. Income is always verified and requires significant documentation.
• Minimizing Debt: Lenders want a low debt-to-income ratio (DTI). Most likely, your debts will be checked during a credit check. If you are asked to provide this information, please report it accurately.
• False employment: Applicants may claim to have one or more fake jobs to make themselves appear more financially stable.
• Iincorrect place of residence: Providing a fake driver’s license or other ID can be tempting, but a lender will likely check this. A lender will also check your social security number or tax identification number to confirm your identity.
• Misrepresented purpose: Requirements are often imposed on how a loan may be used. For example, you cannot usually use a personal loan for study costs. If you violate the lender’s terms, you may have to pay your money back immediately.

How to Strengthen Your Loan Application Without Lying

Honesty is the best option when applying for a personal loan. In addition to the possible criminal charges, it ensures that you only borrow what you can pay back. Lenders have introduced these policies to prevent you from overextending your finances.

There are a few things you can do to strengthen your loan application, even if that means putting things off until you’re in a better position.

• Improve your credit: Your credit score is one of the most critical aspects that lenders consider. A positive payment history, a low credit utilization ratio, and a strong credit mix are all things you can work on to improve your score.
• Pay off other debts: Again, lenders want to see a low DTI. Not only will paying off your debt lower your DTI, it will also improve your credit utilization ratio.
• Increase your income: If possible, try to take on more work to increase your income. This is one of the more difficult ways to strengthen your loan application, but it can help you qualify for better terms.
• Find a cosigner: Adding a co-signer or co-borrower to your application can increase your chances of approval. However, the other person must also qualify and be aware of the risks of acting as a co-signer before signing up.

If these are not accessible, you may want to consider an alternative to a personal loan. 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 as you work to strengthen your overall financial situation.