Never try to fib your way into a loan
There are certain times in life when you should not lie: On your resume, when visiting the doctor, or when applying for a loan. Yet, according to one study, nearly one third of people applying for a loan have lied about some aspect of their history. Why? A need for a loan combined with fear of not getting it if the truth be told. Other reasons cited in the study included a desire for privacy or wanting to avoid embarrassment. Nowadays, loan companies have been keen to implement a new that will catch fraudsters before they are accepted.
Despite some understandable reasons, however, lying on a loan application is not a good idea for a few reasons. First, it's illegal. But if that's not enough to stop you, consider the other ramifications of lying on a loan. The purpose for lying, most likely, is to be approved or to be approved for a higher amount.
Nevertheless, if a consumer lies on the application and is then approved for an amount beyond the consumer's ability to pay, multiple problems can arise. In a more minor situation, such as a smaller, unsecured loan, the debtor may risk multiple penalties as payments are missed or not for the full amount, a poor credit rating, and in the worst scenario, bankruptcy. Alternatively, the consumer may try to obtain a different loan to pay off the first, and the cycle worsens.
Should an applicant lie on a large, secured loan, such as a mortgage, the consequences of not being able to make the payment can also be very detrimental--such as losing one's home on top of the other problems mentioned, such as poor credit or having to declare bankruptcy.
It is also these people who lie or never intend to repay a loan that makes it difficult for those who are honest on their applications and turned down, or for the many people who face higher interest rates because lenders feel they need to charge more in order to protect themselves.
How much impact do the third of applicants who lie on applications have on the overall debt and higher interest rates?
It may be hard to quantify, but overall, one study indicated that the has reached the one trillion pound mark. No small change, that! It stands to reason that the ones who lie on applications to obtain a larger loan could contribute to a high percentage of total debt that might otherwise not have been awarded.
However, even the honest ones have a significant role in the total debt, with over half of all loan applicants borrowing more money than what is needed. How much more?
Research indicates that nearly forty percent take out over ten thousand pounds beyond what is needed. Again, this practice leads to a higher percentage of borrowers being unable to make payments, which in turn makes it more difficult for those who only intend to borrow what they need.
What is all that extra money spent on? The results from one study indicate that the money could perhaps be better spent--or not spent at all. Over forty percent goes towards borrowers' social lives, twenty-six percent for holidays, twenty-four percent for new clothes, and the rest used by people wanting to start their own businesses.