Loans in Switzerland

What is a loan?

A loan is a sum of money that you borrow from a provider and repay with interest. Overdraft facilities, credit cards and certain store cards (with revolving credit facilities) are also legally considered forms of credit. In Switzerland, where the statutory criteria are met, loans to private individuals fall under the Swiss Consumer Credit Act (CCA), which governs consumer loan. The interest covers the provider’s costs and the risk of non-payment.

Which types of loans exist?

There are different types of loans depending on target group, purpose and security:

• Personal loan / consumer loan: For private individuals, freely usable or designated (e.g. certain car loans). Regulated by the Swiss Consumer Credit Act (CCA).
• Mortgage: Designated, secured by property.
• Credit cards / certain store cards: Also covered by the CCA and subject to a higher maximum interest rate.
• Business or SME loans: For companies, not private individuals (Credaris only offers personal loans).

What are the requirements for a loan in Switzerland?

To obtain a loan, you must meet at least the following criteria:

Legal framework

• Affordability check: For consumer loans, a budget calculation is mandatory. A loan may only be granted if you could repay it within 36 months using your disposable income.
• Age: The minimum age is 18. Between 18 and 25 and again from 65, restrictions apply.

Type of income

Permanent employment after the probationary period is considered stable. For fixed-term, temporary or self-employed work, additional conditions apply.

Creditworthiness and credit history

Credit score, entries in credit registers, debt collection proceedings and past payment behaviour affect your chances of obtaining a loan.

Statistical risk assessment

Lenders apply their own criteria, such as residence status, marital status, length of residence and many other factors. Learn more under credit check.

Required documents

At a minimum: identification (ID/passport, residence permit) and proof of income.

You can find out more about the requirements to take out a loan here:

When is a loan classified as a consumer loan?

The Federal Law on Consumer Credit (FLCC) defines when a loan qualifies as a consumer loan. If a loan meets these criteria, the lending process must comply with the Swiss Consumer Credit Act (KKG).

• The loan amount ranges from CHF 500 to 80'000.
• The term exceeds three months.
• The loan is unsecured. «Unsecured» refers to the absence of collateral, such as a direct or indirect mortgage (real estate) or standard bank monetary assets.
• The loan is granted to an individual (a natural person under law)
• The loan is for personal use (distinct, for example, from a loan for business purposes)

Learn more about consumer loan.

Loans – advantages and disadvantages

Disadvantages

• Interest charges apply
• You take on a often multi-year financial and contractual commitment
• Changes in your personal situation or income during the loan term may mean that the agreed instalments put more strain on your budget
• Payment arrears can damage your credit-history and negatively affect other areas of life.

Advantages

In Switzerland, there is a widespread view that one should not buy what one cannot afford. However, life changes that require additional financial means cannot always be planned.

• A loan provides financial flexibility when it is needed.
• It is suitable for expenses that cannot be covered by savings and cannot be postponed.
• Certain expenses are unforeseeable and require additional liquidity.
• A common alternative to a loan is borrowing from friends or family. If this option is not available, or if one prefers not to take it for personal reasons, a loan is a discreet and legally regulated solution.
• Loans in Switzerland are clearly and strictly regulated by law. The Federal Law on Consumer Credit (FLCC) was introduced to protect borrowers from over-indebtedness.
• In Switzerland, a loan can always be repaid earlier than contractually agreed. This reduces the interest costs for the unused term. For consumer loans, such early repayment must be free of charge, except for possible administrative fees if additional work is involved.
• Good to know: For loans outside the scope of the Federal Law on Consumer Credit (unofficial translation of the FLCC), the provider may charge a fee for early termination.

How is a loan calculated?

A loan is made up of the amount, term and interest rate.

What you should consider when choosing the term

• The term controls the monthly instalment of the desired loan. The shorter the term, the higher the monthly instalment and vice versa.
• The longer the term, the higher the loan costs: the interest costs are calculated on an ongoing basis on the loan amount that has not yet been amortised (repaid). The higher this is, the higher the interest costs.

Nevertheless, we recommend choosing a longer term, and repaying more whenever the budget allows. This is possible at any time in Switzerland

If you go to the maximum of your monthly financial possibilities and choose a short term, there is a greater risk that you could fall into arrears with the instalments during the course of the contract. Within a term of often several years, it is realistic to have unexpectedly higher expenses from time to time.

To protect yourself at least partially in the event of involuntary unemployment, illness or accident, it makes sense to consider taking out payment protection insurance.

Loan illustration

Loan amount of CHF 25'000. Effective annual interest rate of 1) 4.9% to 2) 10.95%. Over 36 months, this generates interest or costs of 1) CHF 1'890.36 to 2) CHF 4'225.07 and a monthly instalment of 1) CHF 746.95 to 2) CHF 811.81.

Swiss Lenders offer terms from 6 to 120 months.