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If you’re considering lying on a personal loan application to increase your chances of getting approved, you should think twice. Lying on a loan application is a crime. You could lose the loan, have trouble borrowing money in the future, and even face legal action.Read on to learn what happens if you lie on a personal loan application.
Do Personal Loan Lenders Verify Your Information?
Lenders do verify the information you provide on a personal loan application. Most lenders perform a hard credit inquiry to check your credit score and credit history. Your credit history includes your payment history and how much debt you currently have. If you misrepresent the amount of debt you owe, a lender can find out. Lenders will also check your income, employment, and financial health by looking at the bank statements, income tax returns, pay stubs, or W2 forms that you submit. Some lenders use a third-party verification service to confirm an applicant’s employment, or they may contact your bank to verify the information on your statements. In addition, many lenders have a processing system that helps them spot potentially fraudulent applications. If they see inconsistencies in your documents, they will flag your application. And if they suspect fraud, they may further research your information.
Things People Tend to Lie About on Loan Applications
People may lie on a loan application because they think it could increase their chances of getting approved for a personal loan. Some of the common lies on loan applications include:
Income: Exaggerating income in order to qualify for a loan or get a better interest rate on a personal loan
Debt: Failing to report the full amount of debt they owe
Employment: Claiming to have a job they don’t actually have
Assets: Underreporting their assets to try to get a lower interest rate.
Residency: Non-U.S. citizens might misrepresent their residency status.
Consequences of Lying on a Personal Loan Application
The possible penalties for lying on a loan application can be serious. It’s illegal to lie on a loan application. While serving jail time for lying on an application is rare, it is possible. Lying on a loan application could also cost you the loan. Some lenders will cancel a loan if they find out you lied on your application; others may require you to repay loan funds you’ve already received. In addition, your credit score could be negatively impacted, and you may have trouble getting a loan in the future.
Can You Re-Apply After Lying on Your Loan Application?
If you were caught lying on a loan application, it is up to the lender whether you can re-apply. Some lenders may allow you to reapply after a certain amount of time, while others might choose not to work with you.
Can Lenders Blacklist You for Lying on Loan Applications?
You could lose your credibility as a borrower if a lender catches you lying on a loan application, and it could hurt your chances of getting any loans in the future.
Ethical Ways to Improve Your Loan Approval Chances
If you’re hoping to qualify for a personal loan, there are a few smart things you may do to improve your chances without misrepresenting any information.
Increase Your Income
If your income is low and you’re worried about getting approved for a loan, consider asking your boss for a raise or getting a side hustle to bring in more money. Even though these actions may take time to pay off, they could help you get a loan in the future. And if you currently don’t have any income, you could look into no-income personal loans.
Build Your Credit
Building your credit may be one of the most important ways to improve your personal loan approval chances, since a decent credit score is what you need for a personal loan, among other things. The higher your credit score, the better your chances are of getting approved for a loan and receiving a good interest rate.
Offer Collateral or Use a Cosigner
If you have a low credit score or limited credit history, offering collateral — such as a car or savings account — can make lenders more willing to approve your loan. Alternatively, having a creditworthy cosigner with a strong financial profile can boost your chances of approval and help secure a lower interest rate.Recommended: Getting Personal Loans With a Cosigner Explained
The Takeaway
Lying on an application for a personal loan could result in serious financial and legal consequences. Make sure all the information and documents you provide when applying for a personal loan are accurate. To improve your chances of getting approved for a loan, pay your debts on time and keep your credit utilization ratio low. If your income needs boosting, ask for a raise or consider a side hustle. If you are thinking about applying for a personal loan, Lantern by SoFi can help you find one that’s right for you. By filling out one simple form, you can easily compare loan rates and terms from multiple lenders in our online marketplace. Check your rate today with Lantern.
Frequently Asked Questions
What happens if you lie on a personal loan application?
Do personal loans verify your information?
Can you go to jail for lying on a personal loan application?
Photo credit: iStock/LaylaBird
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About the Author
Jason Steele
Jason Steele has been writing about credit cards and award travel since 2008. One of the nation's leading experts in this field, he has contributed to dozens of personal finance and travel outlets and has been widely quoted in the mainstream media.
