Loan taken out then used for other purposes

SpicyParsnip

Any thoughts or ideas please Ladies and Gentlemen.

If, a person, took a loan out with a bank, being a Unsecured Loan, with the express reason for being for "Home Improvements", and then, being approved, moved those funds, through their bank accounts, and then, they used the full amount of the loan to purchase a fixed asset or property, either shall we say a car or caravan, and none of the funds were used for any "Home Improvements", how likely is it that the bank would be not too "impressed" with this?

Has anyone ever come across or knowledge of what the bank could potentially do if they discovered this?

(By the way, due to my financial circumstances, I can absolutely state, that this is not me, but someone I know, and I'm attempting to get advice)

Thanks all

TadleyBaggie

I doubt they would care, as long as the repayments are being made.

Nebulous2

It was remarkably common at one time.

I used to think there were more people driving around in new kitchens than cooking in them. 

I've never heard of anyone being caught or in trouble for it. 

At the same time I've never tried it and don't intend to.....

nyermen

When making loan applications, obviously false statements shouldn't be made (or cifas comes-a-callin').  But if reasons change, I can't see that being a bad thing (do the T&C of loans say "you must use it for the reason given?".
What if you didnt use it all for home improvements because you didnt need it?

There are certain categories I would say could matter - eg paying off debt and then not doing so, as that could affect the banks reason for granting the lending as their assessment might not be on the basis of additional debt. (in reality, banks I've worked with in this way only consider it not additional debt if the original debt is with them and so they can guarantee offset.  Trusting folk...)

I've never been clear what the category is used for really (I probably should know, bearing in mind my history in Basel & PD/LGD modelling, so sue me ).  I've never seen it applied to decision models myself.

One thing I can think of - if I went to my mortgage bank (HSBC) and asked for a loan for home improvements, maybe they could consider it in that way since they hold a charge on the property already.  But in that case I'd expect them to do it as a mortgage increase rather than unsecured loan?

sourcrates

The interest your bank has in what you actually do with the funds, starts with the application and credit check, and ends when funds are released.

I`m sure they have various algorithms that detect your spending habits on any given account, but if you get a loan for a car, them put it all on the 3.15 at Kempton, there`s not a thing your bank or anyone else can do about it.

SpicyParsnip

Thanks all for info

AmberDepp

sourcrates said:

The interest your bank has in what you actually do with the funds, starts with the application and credit check, and ends when funds are released.

I`m sure they have various algorithms that detect your spending habits on any given account, but if you get a loan for a car, them put it all on the 3.15 at Kempton, there`s not a thing your bank or anyone else can do about it.

They could report them to the Police if they believed the application was fraudulent.

I don't think it's likely the Police would pass it on to the CPS and I don't think it's likely the CPS would prosecute without particularly compelling evidence but, in theory, at least, you could end up in jail.