Lying about a loan application may seem harmless at first – after all, a lender may not even verify your inflated income application or current employment status. However, intentionally lying on a personal loan application is considered fraud, and it can have real consequences. Below, we’ll take a look at how lenders verify the information you submit with your personal loan application and what can happen if you intentionally tamper with documents or other information.
What information do loan companies check on their applications?
When you fill out a loan application, you will be asked to provide information about your salary and your employer. To get a loan, you may also be required to provide pay stubs, tax returns, or bank statements, but this is not always the case.
For example, online lender Prosper claims they verify employment, income, or both on about 61% of their loans. The company cautions investors against relying on self-reported information when making investment decisions.
âApplicants provide a variety of information regarding the purpose of the loan, income, occupation and employment status that are included in borrower lists,â the company writes in its prospectus. âWe do not verify the majority of this information, which may be incomplete, inaccurate or intentionally false. “
For many lenders, verification can be triggered:
- Based on credit profile or demand information.
- When conflicting or unusual information is found in the application, such as a stated income that appears inflated from the job title listed.
- When fraud is suspected.
However, while it can be tempting to lie on a personal loan application since the information is not always verified, it is strongly discouraged. You could face serious legal consequences and make it harder to get a loan afterwards.
What if someone is lying about a personal loan application?
Knowingly providing false information on a loan application is considered a lie and is a crime. For example, posting incorrect wages or forging documents would be considered a lie – and could seriously affect you.
An example: In 2016, the Michigan attorney general’s office filed criminal charges against a state official accusing him of filing false income tax returns when he applied for a personal loan in 2010.
Representative Brian Banks has been charged with two counts of uttering and publishing false information and two counts of using “a false pretext” to obtain the $ 3,000 loan from the Detroit Metropolitan Credit Union . The most serious of the charges carries a 14-year prison sentence if convicted.
Common Lies About Applying For A Loan
When people lie about their loan applications, they often use one of these untruths:
- Exaggerated income: Income is an area that is often misrepresented, with applicants inflating their annual income in order to qualify for a loan or get a higher loan or a better rate.
- Do not declare debt: In addition to your income, lenders need to know your debt amount so that they can determine whether the burden of an additional loan is reasonable or not.
- False employment: Applicants can claim to have one or more bogus jobs in order to appear more financially stable than they actually are.
- Inaccurate residence: A requirement of most loans is proof of citizenship or residency in the United States, and some applicants who are unable to meet this requirement may still attempt to apply for residency.
- Distorted lens: There are often requirements regarding how a loan can be used. For example, you can’t use a student loan to pay for a new car.
- Undervaluation of assets: In order to benefit from a lower rate, some borrowers may not declare all of their assets.
Any of these lies and many more are punishable by law.
Risks of lying when applying for a personal loan
Going to jail for lying on a request is rare, but it does happen. For example, a woman from North Carolina was sentenced to 60 months in prison in 2015, after pleading guilty to providing false information about his income and assets to obtain personal loans. Prosecutors allege she used the money to help finance a $ 1.85 million house. In 2014, a woman from Ohio was sentenced to 14 years in prison for using the identity of others to take out loans from LendingClub and other institutions.
If you lie about your loan, you could lose your loan as well. Prosper says 11% of the requests he checks contain false or insufficient information about employment or income. In these cases, the company cancels the loan before it is funded. With other businesses, you may need to immediately repay the loan funds you have received if the lender learns that you made a false statement. In addition to these criminal consequences, you will face a long list of other repercussions that could impact your financial future. For example, your credit score may be severely affected and you may not be able to take out more loans.
Even if you don’t get caught lying about your request, you are still harming yourself. These loan requirements are put in place for a reason, and if you lie about your loan application, you could end up with huge debt that you won’t be able to pay off. It won’t take long for this uncontrollable debt to affect other areas of your life as well, like your ability to work and maintain a stable home.
How do people get caught lying about loan applications?
Financial institutions have put in place certain precautions to protect them against granting a loan to an underqualified borrower. Your application and any supporting documentation will be checked for inconsistencies and inaccuracies, using public records and financial history to confirm the information you provided.
Technology also helps. Programs and software have special features in place to confirm information and report inaccuracies. Some forms also use special built-in encoding to tell if a document has been tampered with, changed, or edited.
How to get a loan without lying?
Even if you have a hard time qualifying for a loan from a single lender, you are not out of the race for all loans. For example, some lenders offer loans specifically to borrowers with bad credit, while other lenders may specialize in loans for students or members of the military. When you work with a specialist lender, you are more likely to get approval for a loan that actually works for you. You may pay a bit more in fees or have higher interest rates, but you won’t have to risk lying on your application just to get approval.
If a bad credit score is the main thing stopping you from getting a loan, you can also take steps to improve your credit score before you apply. Paying off debt, keeping old accounts open, and refraining from numerous credit card or loan applications are all ways to increase your score and help you get better rates and terms.
The bottom line
Overall, the consequences that can arise from lying about a loan application – from lower credit scores to jail – are not worth the rewards. Instead of lying to get a bigger loan, look for lenders who can give you the most money based on your current financial situation. There are lenders who offer bad credit loans, low interest loans, and personal loans that consider more than your income and credit.