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.
What the Swiss Consumer Credit Act says
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.
Your solvency therefore plays a role
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.
When is borrowing not possible?
If you have any outstanding debt enforcement proceedings, it is unfortunately not possible to take out a loan in Switzerland. Credit providers obtain the information about whether you have already taken out or unsuccessfully applied for loans – and if so how many – from the Central Office for Credit Information (ZEK). If past loans were not repaid on time, or if your application was rejected on a number of occasions, this can result in your loan application being declined again. Furthermore, it is not possible to take out a loan in Switzerland if your net income is less than CHF 2,500 per month or if you do not have a regular income.
Additional requirements for taking out a loan
- You must be at least 20 years old.
- You must have a permanent residence in Switzerland.
- You must hold Swiss citizenship, a permanent residence permit C, or a B, L, or G residence permit.
If you have been the sole or joint owner of your home for at least six months, you will benefit from lower interest rates..
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