Key takeaways

  • Providing false information on your personal loan application can lead to serious legal consequences.
  • Every personal loan application should be filled out with the most accurate and truthful information possible.
  • If you don't qualify for a personal loan without lying, take the time to improve your finances instead of borrowing.

Lying on a loan application may seem harmless, but even if a lender does not verify every piece of information, it is still 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.

Not only can you lose your loan funds, which means you never see them or have to repay what you borrowed immediately, you can also face serious legal consequences. Always be honest when you apply for a personal loan — or any form of credit — and update the lender as soon as possible if there are any changes to your employment or income.

Lying on a personal loan may lead to rejection or worse

Knowingly providing false information on a loan application is considered fraud and is a crime. For instance, putting an incorrect salary or falsifying documents would qualify as lying — and can impact you in serious ways.

Non-legal consequences

You could lose your loan. The company may cancel the loan, and if it doesn’t cancel it, you may have to immediately repay any loan funds you’ve received if the lender learns that you’ve misrepresented yourself.

Your credit score and ability to take out loans in the future may also be impacted. Even if you don’t get caught, you are still causing harm to yourself. You could get stuck with a huge debt that you cannot repay. Missing payments will lead to a lower credit score and default. It won’t take long for that debt to affect other areas of your life, like your ability to work and maintain a stable home.

Criminal consequences

Going to prison for lying on an application is rare, but it does happen. There have been many cases of people being sentenced to prison for providing false information to lenders. These typically follow larger criminal acts — like identity theft — but you are still putting yourself at risk of jail time.

Even if you are not sentenced to time in prison, you will still face consequences. Fines and legal fees will be added to immediate repayment of whatever funds you borrowed.

Information that lenders typically verify

To get a personal loan, you will need to provide a variety of information. Lenders may choose to verify anything you submit, including:

  • Income and current debts.
  • Employer and employment status.
  • Age, address and residency status.
  • Credit score and credit history.

Your application and any supporting documentation will be checked for inconsistencies and inaccuracies. Some application forms also detect if a document has been altered, modified or edited.

Common lies on a loan application

Your income, debt, employment and other information need to be accurate when you submit a personal loan application. Any exaggeration can be considered fraud.

  • Misrepresenting income: Income is one area that can be tempting to falsify. Applicants may inflate their annual income in an attempt to qualify for more funding or a lower interest rate. Income is always verified and will require significant documentation.
  • Minimizing debt: Lenders want to see a low debt-to-income ratio (DTI). Most likely, your debts will be checked in a credit pull. If you are asked to provide this information, report it accurately.
  • False employment: Applicants may claim to have one or multiple false jobs to make themselves appear more financially stable.
  • Inaccurate residency: Providing a fake drivers license or other ID may be tempting, but a lender is likely to check this. A lender will also check your Social Security number or Tax Identification number to confirm your identity.
  • Misrepresented purpose: There are often requirements regarding how a loan may be used. For example, you generally cannot use a personal loan for college expenses. If you violate the lender’s terms, you may be required to repay your funds immediately.

How to strengthen your loan application without lying

Honesty is the best option when applying for a personal loan. Beyond the potential criminal charges, it helps ensure you only borrow what you are capable of repaying. Lenders have these policies in place to prevent you from overextending your finances.

There are a few things you can do to strengthen your loan application — even if that means delaying things until you are in a better position.

  • Improve your credit: Your 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 all things you can work on to increase your score.
  • Pay down other debts: Again, lenders want to see a low DTI. Not only will paying off your debts lower your DTI, it will also improve your credit utilization ratio.
  • Increase your income: If possible, try to take on more work to increase your income. This is one of the more difficult ways to strengthen your loan application, but it can help you qualify for better terms.
  • Find a co-signer: Adding a 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 the risks of acting as a co-signer before they apply.

If these aren’t accessible, you may want to consider a personal loan alternative. There are bad credit loans as well as credit cards that may be easier to qualify for. And while these may not have the best terms, they can bridge gaps in your budget while you work on strengthening your overall financial situation.