On many occasions, people urgently need a loan to face an economic situation or to finance an important project. However, in this type of situation, some people may be tempted to lie about the purpose of the loan to get it as soon as possible or obtain better conditions. What they may not know is that this solution can be very expensive.
When borrowing money from the bank, lying about the purpose of a loan is a very dangerous idea because of what it ends up entailing. In this article, we explore the possible consequences of lying about the purpose of a loan. Continue reading and find out.
What does it mean to lie about the purpose of a loan?
The purpose of the loan translates simply into what you are going to use the borrowed money for. Although apparently it does not sound as decisive as other criteria for the bank, knowing what is going to be done with the money provides security when presenting customer information, , since it is not the same to ask for financing for a house than to reunify.
For this reason, this will be one of the most common requirements that we will be asked for when granting a loan. This makes logical sense, since a loan that is intended to for when investment, such as studying abroad, transmits more confidence than one that, in itself, speaks ill of the payer, such as refinancing a debt. For all this, the purpose of the loan also impacts interest.
In fact, some of these loans will even require proof, as is the case with loans to reform your home in which we will have to provide the budget for the remodeling. This will help the entity to assess the granting of financing based on our risk profile (the result of the personalized evaluation of the financial situation of the applicant for a loan), the amount we need and what we are going to invest it in.
Although, of course, there are also situations in which the lender is not going to ask us for any proof, as is the case with those known as loans for any purpose. Of course, compared to others such as the purchase of a car, they are more expensive. For example, some loans are available at 6.75%, these being for cars, while other more general loans are available at an interest rate of 7.85% TIN.
Types of purpose for which loans are granted
The most common are the aforementioned reforms, car financing, etc. However, banks and other entities offer loans for multiple purposes, so they can be adapted to more than one project. Basically, the most recurring types of reasons for users seeking financing are the following:
- Finance the purchase of a car
- Finance housing reform
- finance studies
- Finance products in stores
- Finance trips and vacations
- finance celebrations
- Finance green projects
- Finance health operations
It is better to show the true reasons for which the loan is requested and not hide the economic problems that you may have. It is a matter of time before the bank discovers them and, if we have deceived them, the consequences will be the new and main problem.
What are the consequences of lying about the purpose of a loan?
- On the one hand, the loss of trust with the entity:
Lying about the purpose of a loan can lead to a loss of trust with the lender. If the lender finds out that the person has lied about the purpose of the loan, the lender may not waldo business with that person in the future. Lenders look for honest customers who are able to repay their loans on time and are realistic about their financial needs.
- On the other hand, the loss of future opportunities:
Lenders often share information with each other. That is why it is normal that the loss of trust can also be detrimental, even in the future, for the client’s reputation. The lender could share this information with other entities, making it more difficult to obtain loans in the future.
Even if the person is able to obtain a loan, they may have to pay higher interest rates or have fewer options available. In some cases, people who are misled about the purpose of the loan can be put on credit blacklists, which obviously makes it more difficult to obtain loans in the future.
- Finally, the legal consequences for improper use:
If a person is found to have used the loan fraudulently, they may face legal charges. Also, if the person is unable to repay the loan due to mismanagement of the funds, he may face a breach of contract lawsuit. The legal consequences can have a negative impact on the person’s life, including fines, legal costs, and even criminal penalties.
Summary and conclusions
Lying about the purpose of a loan may seem like an easy solution to obtain better conditions, however, this action can have serious long-term consequences. It is important to be honest and transparent with the lender to avoid future problems. In addition, it is essential to have a solid financial plan to manage funds effectively and repay the loan on time.
If you are also interested in learning about the consequences of defaulting on a financial product, we recommend one of our articles that answers the question about what happens if you don’t pay a loan.
