Definition - What does Loan Fraud mean?
Loan fraud is when a borrower intentionally deceives a lender by providing false information, or by omitting important information during the loan application process. Such fraud is illegal and can be accompanied by criminal punishment. If a lender discovers that a person has committed loan fraud, they can demand full repayment immediately.
Justipedia explains Loan Fraud
Lenders rely on accurate information to determine whom they would like to qualify for approval for loans. So, if a person lies on their loan application, it can expose the bank to risks that it would have not normally taken. For example, if a person lies and says that they have a higher income than they actually have, the bank may approve the loan request. However, if the person had told the truth, then the application may have been denied. So, essentially, the bank would have been deceived in this situation, which is illegal. Even slight exaggerations can qualify as loan fraud.