Responsible Borrowing

What Happens If You Lie on a Loan Application?

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It’s in the nature of human beings to show how smart they are. They are not afraid to tell a few lies if it makes them look more intelligent and to show just how clever they are. Unfortunately, not everybody lies to be smart. There are sometimes darker reasons for bending the truth to suit oneself.

Some people are pathological liars; others deem it necessary to lie for other reasons. But how about telling a lie on a loan application? Lying in the business world means falsifying, and falsifying equals fraud.

Your ‘White Lies’

Admittedly, “white lies” can often save you from embarrassment as well as helping you to avoid hurting others. Lies can be told to maintain your privacy, as well. Sometimes, though, it can help make things easier when you want something that may be normally difficult to come by.

False Info on Your Loan Application

If you put the morality issue aside for the moment, then you can say that providing false information on your loan application is not so bad – unless you are caught, of course. And if your lie is exposed? Will it disqualify you and affect the loan process? Perhaps we can throw a bit more light on this issue.

Laws of Lending and Borrowing

The lending industry is governed by some laws. The laws state that the lender and the borrower will be honest in their dealings. When a borrower signs the credit agreement, it shows the repayment terms. In the same way, using that logic (and law), the borrower should provide the lender with true information and statements.

Put simply – lying on a loan application is illegal.
If a borrower is caught out lying, providing false information on the loan application prior to approval, then the lender can reject the application outright. The exposure of the lie on the application can also have some further, more serious repercussions and penalties.

Some Penalties

If found out that you lied in your loan application, you will obviously lose all credibility as a borrower. It will certainly be held over your head for future transactions. The truth of the matter is that if information on your loan application is found to have been purposely put there, not an innocent error, you have committed a crime. Penalties can vary from fines to jail, depending on the severity of the matter.

A borrower needs to be even more careful when applying for an unsecured loan, with no collateral involved. A rejected loan application results in long-term vulnerability for future applications.

You Set Your Own Trap

Lying to obtain an unsecured loan is not recommended even if you are not caught. You will get a loan for which you are not qualified. That can lead to having an unmanageable debt and eventual loan default.

What can Happen?

What can happen if you enter false information on a loan application and it’s found out?

  • The loan is rejected
  • Your credit score is badly affected
  • You may have to go to court and be fined
  • You may go to jail
  • You may not submit future loan applications
  • You lose your integrity

Our ultimate advice is: Don’t try to act so smart by lying on your loan application. It’s actually pretty dumb!

12 thoughts on “What Happens If You Lie on a Loan Application?

  1. I recently applied for a personal loan. I provided all the correct information. At least I thought. I have recently moved and my current address hasn’t been updated from the previous address on my state id. Also when providing my full name I didn’t inclue my middle name. None of this was intentional. What do I do to prove that I didn’t purposely give false information?

    1. Hi Jessica,
      Thank you for sharing your concerns with us. The best way to go is to contact your lender and share the changes in your personal and contact details directly with him.

  2. I have an open loan and i thought id provided all the required information. As my employment stopped six weeks ago i havent been able to make the payment. I am applying for a leniancy with hardship. I went on the account to look at my profile and i noticed i put the rent amount as fortnighlty not weekly. Secondly I have put 2 dependent children as the 3rd is not there all the time staying with her other parent often and works part time after school. Is this serious mistake what could be seen as fraud? I dont want to do the hardship if it is though i really need to do it.

    1. Hi Julie,
      It sometimes happens that in the process of applying for a loan some information are inaccurate. Classification of certain events/fact as frauds is usually done by dedicated employees or functions who are trained on how to identify, handle and solve such cases. It also implies a thorough analysis of the case and assessment of the risk. One thing is sure: having incomplete or wrong information on your account can cause problems both in the short-term and in the long-term period as well. You need to get in touch with your lender and explain the situation. You’ll want all your details to be up to date there.
      Good luck!

  3. Hi, We we’re selling our business.Wr signed a purchase agreement and before the closing date I found our that the buyer had applied for a business loan using our business tax id, bank statement that we gave them earlier with the excuse to see our monthly to month expenses, stating in the loan that they are the owners. Is this legal? After we found out we stopped the sale. Now they are treating with suing as for breach of contract. what should we do to defend ourself? Did they do anything ilegal? What should we do next?

    1. Dear Elaone, it’s a pity to find out about your struggles.
      As we’re not a financial institution & we’re not even involved in advertising business loans, we are sure that a lawyer or a financial counselor will help you handle your situation in the best way.

  4. A car dealership “changed” the numbers on my credit application without my knowledge. I’m know assuming it is a common practice for them. Any advice on what I should do?

    1. Hi Ree,
      Changed information on a credit application is an absolute red flag & it should be treated in a fast and correct manner. The first thing to do is to contact the agent you’ve been working with and ask for explanations. It sometimes happens that such errors are due to a fat finger or less attentive clerk who does mistakes.

      If that doesn’t help & if they are not willing to update the details, or if they provide misleading information for you, then you should alert the next level institutions like CPFB or the state attorney.

  5. I know someone who applied for a loan that isn’t available in their state by using someone else I knows address who lives in a state that can get that type of loan. That second person however, who’s address was used, is elderly and mental facilities aren’t fully there. They were blindly and falsely lead into allowing the other person to use their address. My question is what is the outlook on punishment for that second person knowing the situation with them not being there mentally?

    1. Dear Michelle, such situations need to be handled together with the lender or with help of the bodies in charge with consumer protection.

  6. I recently applied for a loan, because I left my job of 3 years I was worried the one month at my job wouldn’t suffice. I stated I was still at my old job, they called a # I provided to verify employment. I stupidly acted as if I was the HR and gave them the info requested. They obviously found out – rejected the loan and have stated their legal team will probably be prosecuting me. This would be my first offence, no priors, no record.

    1. Dear Michael,
      Thank you for being open to bring that up and discuss it. This is a story from which other clients can learn a lot.

      Lying to your lender would be the exact classical example of how you wouldn’t want to act while taking a loan. Unfortunately, such cases happen often. Every similar action poses a risk on the client, as it can directly impact one’s ability to repay the loan. We strongly recommend and encourage our clients to NEVER provide false information on their loan applications, as this is a serious legal infringement.

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