Honesty is the best policy when applying for loans
Often we can be desperate for a loan. There may be something we dearly want to buy, or we may have urgent bills or expenses that can only be met by a loan. These are not the only reason people lie on loan applications. Sometimes the application can be very detailed and even intrusive, and a desire to avoid embarrassment or keep your privacy may lead you to be less than truthful. But no matter what the situation, it is almost always a bad idea to lie on a loan application.
According to studies, almost a third of people admit to having lied on a loan application. It seems that we all have reasons for doing so and while they may be understandable, here are some reasons to tell the truth.
First of all it is illegal. You can lose rights and become subject to penalties and other consequences if you lie on a loan application.
Second of all, and the reason for most lies on loan applications, is that it can lead to larger loans being approved than otherwise would be the case.
The problem is that the amount you are approved for may be beyond your ability to repay. This can become very serious. If you miss payments you will become subject to penalties and fines. You will also start to damage your credit rating which is used for purposes ranging from mortgage and insurance applications, to even getting a job. In worst case scenarios, the mounting debts and penalties can bring you into bankruptcy, which could mean losing your home, car and all other assets.
People lying on loan applications can make the entire credit market harder for everyone. Lenders become more suspicious of information provided on application forms, and the costs of defaulted loans are passed on to other borrowers.
So what is the impact on the market as a whole, of the third of applicants who admit to lying on loan applications? Well it’s almost impossible to quantify, but as consumer debt continues to mount up, and over indebtedness becomes a bigger and bigger problem, the large scale economic consequences of such acts will continue to become more and more serious.
This does not mean that everyone who tells the truth on a loan application is not over burdened by debt. Almost 40% of people borrow more than they need for stated purposes, and almost half the population is struggling with debt repayments.
Perhaps the best advice to take is that we should all try to borrow less and repay more.