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Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
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Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. That way, you know that the information you’re reading, whether it’s an article or a review, is reliable. Bankrate logo.
Applying for a loan is a common financial move for many people, whether it’s a mortgage, auto loan, or personal loan However, some applicants unfortunately try to improve their chances of approval by providing false information on their applications. This dishonest behavior can lead to severe legal penalties, including potential jail time. In this article, we’ll break down the serious legal risks of lying on a loan application so you can make informed decisions
What Constitutes Loan Application Fraud
First let’s define what is considered loan fraud. Essentially it involves intentionally deceiving a lender by providing inaccurate or misleading information on a loan application. This is done to make the applicant seem more qualified for a loan than they actually are.
Some common examples of loan application fraud include:
- Inflating your income
- Failing to disclose debts or other liabilities
- Providing fake employment information
- Lying about your assets or overvaluing property
- Using someone else’s identity or Social Security number
These lies are meant to paint a false financial picture to get a lender’s approval. Even small exaggerations can be considered fraud if they influence the lender’s decision.
Federal Laws Against Loan Fraud
Giving false information on an application to a federally regulated lender, like a bank or credit union, is now a federal crime.
Two major federal statutes address loan fraud:
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18 U.S.C. § 1344 – This law prohibits any scheme to defraud a financial institution, including banks and mortgage lenders.
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18 U.S.C. § 1014 – This specifically covers making false statements to influence a financial institution, like overvaluing an asset to get a bigger loan.
In addition, most states have laws that criminalize providing deceptive information on credit applications.
The Serious Criminal Penalties
Under federal law, a conviction for loan application fraud can potentially lead to:
-
Up to 30 years in federal prison – The maximum prison sentence for federal bank fraud is 30 years. Actual sentences depend on factors like the loan amount.
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Fines up to $1 million – Large fines can also be imposed on top of imprisonment. The judge determines the fine amount based on details of the fraud.
While not every case leads to the maximum, these steep sentences illustrate how seriously fraudulent loan applications are taken. Probation may be given in some instances instead of or in addition to jail time.
Financial and Credit Damage
Aside from potential imprisonment, loan fraud can trash your finances and credit for years. Here are some other typical consequences:
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Civil lawsuits: The lender can sue to get their money back from the bad loan. This can result in a crushing court judgment.
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Loan cancellation – The lender may cancel the loan and demand immediate full repayment. This can devastate your budget overnight.
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Tanked credit scores – Loan fraud devastates your credit, making it extremely hard to qualify for future loans and credit cards.
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Employment issues – The fraud becomes public record, which may impact jobs requiring background checks.
In short, the financial damage can linger long after any criminal penalties.
How Loan Fraud Is Investigated and Prosecuted
Loan fraud is often first detected during a lender’s underwriting process or internal audits. They may notice questionable information or discrepancies that raise red flags.
Once fraud is suspected, the lender refers the case to authorities. For federally backed loans, this is typically the FBI. The FBI gathers evidence, and if sufficient proof of a crime exists, they pass the case to federal prosecutors.
Prosecutors then decide whether to pursue criminal charges. This could mean showing evidence to a grand jury in order to get an indictment so that the case can go to trial.
Think Carefully Before Providing False Information
When you fill out a loan application, make sure you give accurate information about your finances. Even small lies could potentially land you in legal jeopardy. Fraud can also ruin your credit and finances for a long time.
If you’re worried you may not qualify for the needed loan legitimately, discuss your options with a loan officer. There may be alternative types of financing available that better fit your current financial profile. Doing things the right way will help ensure your legal protection and financial health in the long run.
Information that lenders typically verify
To get a personal loan, you will need to provide personal and financial 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
- Collateral for secured loans
Your application and any supporting documentation will be checked for inconsistencies and inaccuracies. Some application forms also detect whether a document has been altered, modified or edited.
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Calendar Icon 8 Years of personal finance experience Kellye Guinan is an editor and writer with over seven years of experience in personal finance.
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Calendar Icon 11 years of personal finance experience Katie Lowery is a Bankrate editor on the Loans team, where she shapes content to help people navigate personal loans, auto loans and student loans.
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Thomas is a well-rounded financial professional, with over 20 years of experience in investments, corporate finance, and accounting. His investment experience includes oversight of a $4 billion portfolio for an insurance group. Varied finance and accounting work includes the preparation of financial statements and budgets, the development of multiyear financial forecasts, credit analyses, and the evaluation of capital budgeting proposals. In a consulting capacity, he has assisted individuals and businesses of all sizes with accounting, financial planning and investing matters; lent his financial expertise to a few well-known websites; and tutored students via a few virtual forums.
At Bankrate, we take the accuracy of our content seriously.
“Expert verified” means that our Financial Review Board thoroughly evaluated the article for accuracy and clarity. The Review Board comprises a panel of financial experts whose objective is to ensure that our content is always objective and balanced.
Their reviews hold us accountable for publishing high-quality and trustworthy content.
Bankrate is always editorially independent. While we adhere to strict , this post may contain references to products from our partners. Heres an explanation for . Our is to ensure everything we publish is objective, accurate and trustworthy. Bankrate logo
Founded in 1976, Bankrate has a long track record of helping people make smart financial choices. We’ve maintained this reputation for over four decades by demystifying the financial decision-making process and giving people confidence in which actions to take next.
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. All of our content is authored by highly qualified professionals and edited by subject matter experts, who ensure everything we publish is objective, accurate and trustworthy.
Our loans reporters and editors focus on the points consumers care about most — the different types of lending options, the best rates, the best lenders, how to pay off debt and more — so you can feel confident when investing your money. Bankrate logo
Bankrate follows a strict editorial policy, so you can trust that we’re putting your interests first. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions.
We value your trust. Our mission is to provide readers with accurate and unbiased information, and we have editorial standards in place to ensure that happens. Our editors and reporters thoroughly fact-check editorial content to ensure the information you’re reading is accurate. We maintain a firewall between our advertisers and our editorial team. Our editorial team does not receive direct compensation from our advertisers.
Bankrate’s editorial team writes on behalf of YOU – the reader. Our goal is to give you the best advice to help you make smart personal finance decisions. We follow strict guidelines to ensure that our editorial content is not influenced by advertisers. Our editorial team receives no direct compensation from advertisers, and our content is thoroughly fact-checked to ensure accuracy. So, whether you’re reading an article or a review, you can trust that you’re getting credible and dependable information. Bankrate logo
Bankruptcy after lying on a loan application
FAQ
Can you go to jail for lying on a loan application?
Jail time: 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 usually happen after bigger crimes, like identity theft, but you are still putting yourself at risk.
Is it illegal to lie on a loan application?
It’s illegal to lie on a loan application. While serving jail time for lying on an application is rare, it is possible. People have been prosecuted and sent to prison for the crime. 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.
Can a non US citizen lie on a loan application?
Residency: Non-U. S. citizens might misrepresent their residency status. 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. People have been prosecuted and sent to prison for the crime.
What happens if you lie on a mortgage application?
In a worst case scenario, the penalty for lying on a mortgage application in the UK is up to 10 years in prison. That’s the maximum sentence for serious mortgage fraud, but opportunistic mortgage fraud by an individual is more likely to result in a fine or a suspended sentence. What should you not tell a mortgage lender? 1) Anything Untruthful.
Can You reapply if you lied on a loan application?
Lenders decide if you can reapply for a loan if they find out you lied on the first one. 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?.
What if I don’t qualify for a personal loan without lying?
If you don’t qualify for a personal loan without lying, work to improve your finances instead of borrowing. Lying on a loan application is far from harmless and is considered fraud. It may be tempting to lie about your income, job, or assets to make yourself look better to lenders, but you could get into a lot of trouble if you do.
What happens if you get caught lying on a loan application?
Lying on any loan application is illegal and considered fraud. If your lie is discovered, the lender can deny loan approval. If the loan has already been approved and the funds are disbursed, the lender can declare the loan in default and immediately demand full repayment.
What is the penalty for lying on a credit application?
Lying on a card application is also a federal crime; a conviction for a federal charge can lead to up to 30 years of prison and $1 million in fines. In addition, if a lender discovers that a person has lied on their application, it might ask the cardholder to repay their debt immediately, putting them in a fiscal bind.
What happens if you lie about what a personal loan is for?
… it’s providing an incorrect salary or falsifying documents, you could lose your loan, tarnish your financial health and potentially face criminal consequencesMar 10, 2025
Can I go to jail for not paying a personal loan?
Generally, as long as there was no fraud involved, you cannot go to jail for failure to pay back a loan. However, the credit union can sue you to collect the bill. How flexible they will be in working with you on this size loan is usually up to the loan officer or credit manager. Talk to him or her.