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!

4 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.

  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?

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