It’s in the nature of human lives to show how bright 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.
CoreLogic’s mortgage fraud report found that 1 in 123 applications contained fraud in the second quarter of 2019.
‘White Lies’ and False Info on Your Loan Application
Admittedly, in everyday life, “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 commonly difficult to come by.
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. One of the common white lies on loan applications is overstating the income.
What if your lie is detected? Will it disqualify you and affect the loan process? Perhaps we can throw a bit more light on this issue.
Why is Lying a Bad Idea?
There are several reasons that lying on loan applications is not a good idea. Here’s just a few of them below.
Lying on a loan application is illegal
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.
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.
The risk of getting caught is too high
If it’s 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 the 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.
You probably don’t need to lie
Getting approved for a loan isn’t as challenging as you might think. There’s a lot of different types of loan products and many lenders that can help in your circumstances. Whether you have some grey areas in your credit history or don’t have an income that can be verified, there are online loans with minimum requirements for which you might be eligible. For example, if you have a poor credit score or no credit score, you still might qualify for an online payday loan or for an online personal loan for bad credit. Our network of direct lenders run soft credit checks, which don’t damage your score.
Instead of taking the risk of being caught, with 12M Loans, you can apply for a fast online loan in a few minutes and get your funds the next business day.
What are the Common Lies?
Lenders have experience dealing with loan application frauds, and they know what to look out for. Here are some of the common lies they see:
- Reported income
- False employment
- Inaccurate residency status
- Source of deposit
- The purpose of the loan
- Over/undervaluing assets
- Not declaring debts like credit cards, home loans, or personal loans
- Not reporting children or spouse information
How Can You be Caught?
If you lie on a loan application, there is a high probability that you’ll get caught. There are many ways lenders can find out that you’re lying on your loan application, including:
1. Supporting documentation you provide – tax returns, payslips, and bank statements have a lot more information than you know. The inconsistencies are easy to spot.
2. Loan contract – Additional documents that are returned with your loan contract when it’s ready for settlement can raise red flags.
3. Hidden codes – There are hidden codes on many of the documents which can tell the lender if they have been edited.
4. Post-settlement auditing – If your loan is audited after your loan application has been approved, they can find something that was missed.
What Can Happen If Someone Lies on an Online Loan Application?
What happens if you lie 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
If you lie on a loan application, but it hasn’t been advanced, it goes beyond being declined. Your name is added to a blacklist and could even be reported to the police.
If your loan has settled, there’s even more to lose. Your lender could “call-in” your loan, meaning send you a notice stating you have 30 days to repay the loan. Your only choice is selling or refinancing the loan at that point.
You Definitely Don’t Want to Get There
Here’s a story that will paint a picture of what happens if you lie on a loan application. Shahram was caught lying about income on loan applications to three different federally insured lenders. All three loans ended up going into default.
This lying was considered a federal crime. He was sentenced to 18 months in federal prison.
In his appeal, he tried to argue that the interest he paid on those loans should be deducted from the lender’s losses, which would reduce his sentence. The judge determined that Shahram’s lying on the loan applications actually resulted in a loss to the lenders, and the unpaid interest increased their loss, and therefore his sentence was correct. Committing a federal crime doesn’t pay.
How Can You Get a Loan Without Lying?
You don’t have to resort to lying to get approved for an online loan. 12M Loans can find a direct lender that can help you in your situation. We are working with a reliable network of direct lenders who offer competitive rates and terms, accepting applicants with any credit score. All you need to do is to fill out our online application form on our website, and we’ll do the rest. You can learn more about how it works here.
As you can see, lying on a loan application is going to put you in a terrible situation and just isn’t worth the rewards. Don’t lie to get approved or get a larger loan. Instead, apply for an payday loan online (or any other online loan) with 12M Loans, providing accurate information, and avoid the stress of knowing that you lied.
Our ultimate advice is: Don’t try to act so smart by lying on your loan application. It’s actually pretty dumb!