You Shouldn’t Lie On Your Personal Loan Application

Lying on a loan application is far from harmless and is considered fraud. While it can be tempting to misrepresent your income, employment or assets to seem more appealing to lenders, you could face serious consequences.

“Lenders typically have multiple layers of fraud detection in place to track potential fraud at application, after approval and before funding,” says Denny Ceizyk, former loan originator and senior writer for Bankrate’s consumer lending team. “Many of these processes are automated, but it’s not uncommon for humans to add an extra manual check before funding your loan.”

Knowing how lenders verify information and how to submit a strong and honest application can ensure a quicker approval process and help you avoid red flags on your profile.

Lying on a personal loan may lead to rejection or worse

You could face serious consequences if you lie on a loan application. Whether it’s providing an incorrect salary or falsifying documents, you could lose your loan, tarnish your financial health and potentially face criminal consequences.

Financial consequences

• Loan cancellation: You could lose your loan if the lender discovers that you falsified the contents of your application. The company may cancel the loan before disbursement, or if you’ve already received the funds, you may have to repay the full debt immediately.
• Financial hardship: If you lie to get a loan you ordinarily wouldn’t qualify for, you could end up with a debt that you cannot repay. Missing payments will lead to damage to your credit score, loan default.

Criminal consequences

• Fines and legal fees: Your lender may sue you for repayment. Fines and legal fees will be added to the immediate repayment of the funds you borrowed.
• Jail time: Going to prison for lying on an application is rare, but it does happen. These typically follow larger criminal acts — like identity theft — but you are still putting yourself at risk.

How do lenders find out you lied on your application?

“With personal loans, lenders are mostly focused on employment, earnings and identity fraud,” says Ceizyk.

To get a personal loan, you will need to provide personal and financial information with supporting documentation that lenders will check and compare for inconsistencies and inaccuracies.

Ceizyk also notes that you may need to provide additional documents if you’re self employed or work for a small, family-owned business. “[Lenders] will look for red flags like employment verifications by family members, or companies without a valid business license or verifiable address,” he says.

Loan application fraud also includes altering the documents you provide lenders to help them verify your information. Keep in mind that lenders also have tools for detecting whether a document has been altered, modified or edited.

How to ensure accuracy on a loan application

All of your must be accurate when you submit a personal loan application. Any error or questionable answer can be a red flag, even if it’s unintentional.

To ensure your loan application has the most accurate information, keep the following tips in mind.

Proofread your application, documents and other information

Check your application for misspellings or any other errors that could get flagged. You could even have a trusted loved one review the application as an extra set of eyes.

Review the supporting documents you plan to provide for misspellings or outdated information. For example, if you recently moved and never updated your license, make sure you get it updated before applying. Look through your credit report for errors that may negatively impact your credit score or eligibility or, at the very least, slow down the verification process.

Consider variable earnings

“Don’t pick your best sales month if you’re commissioned or self-employed to qualify for a loan. Lenders will almost always average out any variable income over 12 to 24 months,” says Ceizyk. “However, if your recent earnings are on the rise, you can certainly provide a letter and copies of the recent paychecks to support the idea that your earnings are on the rise. Lenders may be willing to lend you slightly more if your income is rising, not falling.”

Contact the lender

If you have questions or need clarification, contact the lender. Customer service hours and contact information should be on the lender’s website. There may even be a live chat option to help with basic application questions.

Additionally, update the lender as soon as possible if there are any changes to your employment, income or contact information.

How to strengthen your loan application without lying

There are a few ways you can strengthen your loan application. Some strategies work for current applications while others may require waiting to borrow until you’re in a better financial position.

For personal loan applications that can’t wait

For issues that may have been rectified but are harder to verify, Ceizyk recommends including a letter of recommendation backed by supporting documentation. “If you were out of work due to an accident, or were laid off but have a new full-time job, providing a letter along with proof of the accident, medical bills, lay-off notice or new job offer could improve your approval odds,” he says.

You could also apply with a creditworthy co-signer or co-borrower to your application may improve your chances of being approved. However, the other person will need to qualify as well — and should know they can be held responsible for payment.

10 alternatives to personal loans and who they’re for

If you worry about your ability to qualify for a personal loan, these other products may provide a safer option than lying on an application

Explore your options

For personal loan application that can wait

Credit score is one of the most critical aspects lenders consider. A positive payment history, low credit utilization ratio and a strong credit mix are parts of your credit score you can work to increase. Continue to make on-time payments for at least the minimum amount due to foster a positive payment history — the biggest factor in credit score. You can also pay down your debts to lower your utilization ratio. By increasing your income through a raise or side hustle, you can put more money toward your debt. Earning more and lowering your debt also helps lower your debt-to-income ratio (DTI), which may be another qualification requirement for a loan.

Bottom line

Honesty is the best policy, especially when it comes to borrowing money. Lying on a loan application has the potential for severe and long-term consequences. A lender’s requirements for borrowing money are in place to protect them from losing money and to protect you from landing in a financial situation you can’t manage.