No, crossing your fingers doesn't make it OK to lie on a loan application. | Maskot/Getty Images

Maskot/Getty Images

No, crossing your fingers doesn’t make it OK to lie on a loan application.

A lender might not check your inflated income claim on a personal loan application, but that doesn’t mean it’s OK to say you earn more than you do. That is considered fraud, and it can have real consequences.

In this article, we’ll discuss how lenders verify the information you submit with your personal loan and what can happen if you intentionally falsify documents or other information. In short, lying on a loan application is a bad idea – here’s why.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

Personal loan information verification

When you fill out a loan application, you’ll be asked to provide your salary and employer information. You also may be asked to provide pay stubs, tax returns or bank statements, but that doesn’t always happen.

For example, online lender Prosper Marketplace says it verifies employment, income or both on about 59% of its loans. The firm cautions investors against relying on self-reported information when making investment decisions.

“Applicants supply a variety of information regarding the purpose of the loan, income, occupation, and employment status that is included in borrower listings,” the company wrote in its prospectus. “We do not verify the majority of this information, which may be incomplete, inaccurate or intentionally false.”

Another online lender, Lending Club, says it conducts income and employer verification on about 70% of its loans. Verification may be triggered:

  • “Based on select information” on the credit profile or application.
  • By “conflicting or unusual” information found in the application, like a stated income that appears inflated relative to the stated job title.
  • When fraud is suspected.

“We believe that verifying a borrower’s income or income source may be useful in certain circumstances for screening against exaggerated income and for validating the borrower’s ability to repay a loan,” Lending Club states on its website. “However, we believe it is not necessary to verify this information for all borrowers.”

So while it might be tempting to lie on a personal loan application given that information is not always verified, it is strongly discouraged. You could face serious legal consequences and make it harder to take out a loan down the road.

What happens if someone lies on a personal loan application?

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

An example: In 2016, the Michigan attorney general’s office filed criminal charges against a state representative accusing him of producing fake income statements when he applied for a personal loan in 2010.

Rep. Brian Banks was charged with 2 counts of uttering and publishing false information and 2 counts of using “a false pretense” to get the $3,000 loan from Detroit Metropolitan Credit Union. The most serious of the charges carries a prison term of 14 years upon conviction.

Risks of lying on personal loan application

Going to prison for lying on an application is rare, but it does happen. For instance, a North Carolina woman was sentenced to 60 months in prison in 2015 after she pleaded guilty to providing false information regarding her income and assets to obtain personal loans. Prosecutors allege she used the money to help finance a $1.85 million home.

And in 2014, an Ohio woman was sentenced to 14 years in prison for using other people’s identities to take out loans at Lending Club and other institutions.

Even if your intent isn’t criminal, you could lose your loan.

Prosper says 11% of the applications it verifies contain false or insufficient employment or income information. In those cases, the company cancels the loan before it is funded.

Meanwhile, Lending Club says that if it learns after a loan has been funded that a borrower made any “material misrepresentation” or committed fraud, it could demand immediate repayment.

In addition to these criminal consequences, you also face a long list of other repercussions that could impact your financial future. For example, your credit score can take a large hit and you may not be able to take out loans going forward.

Get pre-qualified

Answer a few questions to see which personal loans you pre-qualify for. The process is quick and easy, and it will not impact your credit score.

The bottom line

Overall, the consequences that can come with lying on a loan application really just aren’t worth the rewards. Instead of lying to get a bigger loan, make sure you shop around and evaluate the lender who can give you the most money based on your current financial situation. It’s a smarter long-term move and lets you avoid the stress of knowing that you lied and potentially having to face serious consequences.