What are the criteria for taking out a loan in Switzerland?

In Switzerland, people looking to finance a "big-ticket" item often decide to take out a loan. According to the Swiss Federal Statistical Office, over 15% of the Swiss population take out a loan when they have to finance a vehicle. However, not everyone who applies for a loan is successful. In Switzerland, certain conditions need to be met before a personal loan can be granted.

Switzerland has strict rules when it comes to taking out loans that are subject to the provisions of the Consumer Credit Act. The primary objective is to protect the consumer from excessive debt. 

If the loan repayments are not within their monthly budget – which is drawn up and calculated in accordance with the statutory requirements – and there is a risk of excessive debt, loans cannot be granted to private individuals. This is defined in the Swiss Consumer Credit Act. In addition, the law states that the budget must show clearly that the individual is in a position to repay the loan amount as well as the interest due within 36 months. This also applies if a longer term has been agreed.

The question of whether you are in a position to repay a loan within 36 months is generally decided based on the calculation of your credit limit. The credit limit is the financial framework or discretionary income you have left to spend after paying all your bills, multiplied by 36 months. This credit limit is offset against the financial burden of the requested loan (loan amount plus interest) due over a period of 36 months.

So when credit providers are checking your solvency, they take this discretionary income into account. In fact, credit intermediaries are required to do so under the Swiss Consumer Credit Act. You will therefore be asked about your net income, housing costs, as well as health insurance premiums. These costs will be taken as the basis for determining whether you can afford to take out a loan.