What Happens If I Lie On My Loan Application In Malaysia?

Malaysia is known for many things, including our amazingly delicious local delights, the Petronas Twin Towers and being home to some of the most beautiful beaches in the world. But, following a survey conducted by FICO, the nation is now known for being home to the rising threat of “liar loans”. 

An alarming three in five Malaysians have the concerning sentiment that it is normal or acceptable in some cases to misrepresent their income when applying for a bank account (66%), mortgage (59%) or automotive financing (64%). On the contrary, the majority of consumers globally (56%) reject the idea of exaggerating their income on loan applications, viewing it as morally wrong. 

With the rising cost of living and much stricter loan regulations, it is unsurprising that many Malaysians may be tempted to stretch the truth and inflate their income or underreport debts just to apply for a loan. While lying on your loan application does offer a much easier and hassle-free approach, you risk far more than a loan rejection. 

Let’s set things straight: What constitutes a lie on a loan application?  

The easy answer is, if it’s evidently backed, it’s a lie. This includes any misstatement of fact (even if it was accidental), which can be considered a form of fraud. In Malaysia, some of the most common forms of dishonesty during loan application are:

• Providing fake payslips and bank statements 
• Falsifying employment information 
• Using a “ghost” guarantor 
• Overstating income

Never mind, they won’t check in Malaysia lah! Malaysia boleh! 

That’s where you’re wrong. Malaysian banks and financial institutions rarely take your word at face value and will conduct stringent checks before approving loans. 

• Income verification: Income slips, EPF statements, or even your latest income tax filings requested by lenders are one way for them to verify your income. If something seems suspicious, they can call your employer to confirm your income and employment. 
• CTOS/CCRIS checks: The Central Credit Reference Information System (CCRIS) and private agencies like CTOS are just some of the systems set in place to help lenders access your credit history. The database contains all your past and current loans, payment behaviour and even rejected applications. 
• Bank statement analysis: In today’s cashless and digital economy, your bank account offers the most transparent and accurate depiction of your cash flow and spending habits. A mismatch will result in lenders being more careful about approving your loan 

In short, they will and can verify if you’re accurately depicting your finances, so the best piece of advice? Just don’t do it. 

Read More: Best Personal Loans In Malaysia

I did it anyway. I lied on my loan application. What happens if I get caught? 

Well, you’re down for some serious legal trouble. 

1. Loan rejection or recall 

As painful as it is to receive the news that your loan has been rejected, this is easily one of the best outcomes from you lying on your application. However, this only happens if your lie is exposed before the loan is disbursed. If discovered after, you may either face the consequence of having your loan agreement cancelled, be demanded for immediate repayment or be penalised with legal and administrative fees. 

2. Blacklisting 

This is one blacklist you do not want to be. Your name and records will be flagged in internal systems, which can severely limit your future access to financing, even if you’re lending with other banks or financial institutions. 

3. Legal action and police action 

Submitting a falsified document or providing false information can lead to criminal charges under: 

• Anti-Money Laundering and Anti-Terrorism Financing Act (AMLA)
• Penal Code Sections 458 and 471, which can result in up to 7 years imprisonment and a fine 
• The Financial Services Act 2013 (FSA) can lead to heavy penalties and imprisonment 

Sure or not? It’s all just a scare tactic! 

In 2021, two men were fined RM10,500 each for using three fake statements as supporting documents to help another individual get quick bank approval for a loan. In recent years, Malaysian authorities have also cracked down on many similar syndicates that produce fake payslips and employment letters. Many have been either fined or served jail time under the Penal Code. 

Some applicants underestimate how detrimental their small lies can be and believe that a small misrepresentation won’t matter. Actions like rounding up your income, hiding a side debt or even claiming you’re a permanent employee instead of being contracted can affect a bank’s risk assessment. Once discovered, these seemingly small lies can lead to you being seen as untrustworthy in the eyes of lenders. 

What should you do instead if you’re struggling to get a loan approval? 

Lying is never a smart solution. Here are some safer and smarter ways to increase your chances of getting your loan request approved.

1. Improve your credit score: Clear any overdue payments or reduce your credit utilisation. Avoid applying for too many loans at once, too can also help to improve your credit score. A clean record will naturally increase your chances.
2. Ask for a more realistic amount: Consider decreasing the amount of your loan request. Ask for a more realistic amount based on your income and commitments.
3. Use licensed credit counsellors: Agencies, including AKPK (Agensi Kaunseling dan Pengurusan Kredit), offer free financial advice and debt management to help improve your financial situation.
4. Consider alternative lenders: With more credit cooperatives and fintech lending platforms being established, it is now possible to consider alternative lenders. Furthermore, with the Bank Negara Malaysia licensing some of these platforms, it is now easier to choose credible lenders to approach.

Final thoughts? Just don’t do it! 

I can’t say this enough. But there shouldn’t be any situation where you should even consider lying in your loan application. Not only can it lead to rejection, it can also damage your credit profile, which makes it much harder for you to get another loan approval in the future. 

If you’re unsure about which bank loan you qualify for or need further guidance, iMoney’s comparison tools and financial calculators help you find suitable options based on your financial situation, so you won’t have to lie again! Follow this link today!