Personal credit in Switzerland is divided into two main categories: conventional and online. A large part of the personal lending business in Switzerland is carried out in a conventional manner, in which borrowers visit a lender’s branch in person and apply for a loan. But the proportion of personal loans applied for online is increasing. Many banks now offer the possibility of applying for loans via their internet portals. Some lenders even operate entirely remotely. To find the right Swiss online loan for you, you should therefore choose the platform carefully.
The Swiss Consumer Credit Act regulates consumer loans between CHF 500 and CHF 80,000 issued in Switzerland. These rules came into force on 1 January 2003.
The regulations apply to credit cards, customer loyalty cards, private loans, leasing agreements and bank overdrafts.
In addition, the regulations also limit the maximum effective interest rate to be charged in connection with a loan. The Swiss Federal Council adjusts the interest rate limits annually in line with the general market environment.
The regulations also require that before accepting a loan application, lenders must take into account a number of aspects of the applicant’s track record, including any irregularities in the way their rent or other obligations are met, as recorded by a debt collection agency. If a lender is unsure of an applicant’s creditworthiness, it should request the applicant’s debt collection record report, proof of income and other documents that could help the lender protect the applicant from incurring more debt than the lender can handle.
In addition to the loans offered by lenders, personal loans can now also be obtained via peer-to-peer platforms. These operate on a simple principle: borrowers apply for credit and lenders – usually private investors – lend them money in exchange for interest. The peer-to-peer platform connects creditors to borrowers, performs the necessary credit checks and provides potential financiers with credit ratings. It also handles the transfer of loans and the collection of repayments. This option has many advantages, not least of which is the regular flow of income. In other words, P2P loans can generate fixed interest income for investors. It also provides higher returns compared to investing in products offered by banks. Finally, most equity lending platforms have an automated way for the investor to reinvest his or her money. The interest earned will begin generating returns as soon as it is deposited into your account.
The most affordable personal credit available in Switzerland can often be found online. When applying for Swiss online credit, borrowers must enter all the necessary information themselves. By asking them to do much of the work themselves, creditors have reduced administration and infrastructure. These cost savings enable them to offer loans at lower interest rates for the debtor.
Lenders often indicate a minimum and maximum interest rate for loans. The former is used for loans to borrowers with excellent creditworthiness. The second is used in the case of borrowers whose guarantor is uninsured. In all cases, one should take time to consider whether an application is likely to be accepted or not before applying. If it is rejected, it will have a negative impact on your credit report, making it difficult to obtain loans from other institutions.
The internet is full of offers from loan brokers and sellers who claim that some are the cheapest or the best. Taking out a loan in Switzerland requires great caution. Not all online subsidy sites, comparisons and brokers always prioritize your interests. Make sure you compare interest rates and get an unbiased overview of available credit and the conditions attached to it before you settle on a single loan. There are many other hidden pitfalls with loans that could cost you money unless you are warned, as well as other costs associated with a financing arrangement. Many providers charge an arrangement or administration fee when setting up the loan. Historically, financiers have often sold Payment Protection Insurance (PPI) at the same time a loan is taken out. However, authorities have cracked down on this practice due to widespread mis-selling. That said, PPI can be useful because it covers repayments if you are in an accident, become ill or are unemployed. However, costs vary widely. The cheapest policies are usually available from independent providers rather than banks and building societies.