Loans in Switzerland, All You Need To Know:
At FUNDGECKO, we help you take out a loan that’s best consistent with your needs. We help make your loan selection and application process seamless by providing all the information you need (including the parameters to comply with and the loan conditions) before contracting a financial product.
- With online mini loans, you can get CHF 300 at the first application
- Online mini loans are often small in size and high in interest rates
- Online mini loans are repaid after a short time and in a single payment
- Online mini loans are mostly applied for during an economic emergency
- Long term loans have low rates and are big in size
- Long term loans are repaid after a long time
- Long term loans have a longer application process and more stringent eligibility criteria than online mini-credits
What are loans and how do they work?
A loan refers to a certain amount of money that we borrow from a bank or an entity for different purposes such as making pbig purchases, funding a project, clearing medical bills, paying tuition fees, etc, intending to repay later. Loans are accompanied with interests and other fees, depending on the entity, the loan type, and the repayment period. Small loans tend to have short repayment periods and high interests while long-term loans are mainly big loans with better loan conditions. A lender is never obliged to grant loans regardless of whether the applicant meets all the qualifications or not.
A loan can be a good debt only when it’s used to help you make good financial progress. It’s never meant to make you run into debts.
According to the World Bank Statistics, the average lending rate in Switzerland as of 2020 was 2.6%, which the country has tried to maintain ever since. About 50% of all loan applications in Switzerland are disapproved. For whichever reason, all the disapproved loans are registered with credit bureaus (ZEK, CRIF, or Intrum Justitia) where the reason for their disapproval is assessed.
While the entity may fail to let you know why they disapproved your application, this might hurt your credit history with ZEK. Hence, it’s prudent to know what to stick to during the application process. In case of any questions regarding the same, feel free to contact our FUNDGECKO team.
What we should know before taking out a loan in Switzerland
- Generally, Switzerland’s financial markets are stable, making the lending rates in the country friendly for consumer credits
- Many entities in Switzerland will reject your loan application if you register poor credit history with credit bureaus.
- Demand for consumer loans in the Swiss lending market has surged in recent years as a result of very low interest rates. The country maintained the negative benchmark interest rates for borrowing in Swiss Francs until the coronavirus pandemic, which faltered the mergers and acquisitions (M&A) activity.
- The Swiss lending market is getting more conducive for borrowers as there has been significant growth in lending entities that compete with banks to provide better lending conditions.
- While the Swiss government has set the rules governing consumer credits, non-bank lenders tend to have eligibility criteria that are unique to them. Hence, it’s important to be sure of the terms of the contract before signing up for a loan
- Conduct personal research about the credit company, its history, and reputation before getting a loan from there
- Every type of credit entity is required to have a license from the government allowing them to carry out lending services
When is it advisable to apply for loans?
A mini loan can bail you out of a financial emergency within minutes. Due to their fast nature, mini loans are what we often opt for in case we need a quick financial fix. However, if the borrower is not cautious on how they employ this type of credit, they will end up with more of the negative effects than the positive. Hence, it pays off greatly to know which circumstances are best and worst regarding this credit
YES, it is advisable to apply for mini-loans if/if not:
- You have a once-and-for-all expense
- Your need cannot wait
- You’re able to assume payment comfortably
- You do not solicit on a regular basis
- You know how much you’ll pay eventually
- You’re informed of how the credit works
- You have a recurrent need
- Your need can wait
- You’re not sure of your ability to repay the loan
- You might develop dependency on this credit
- You don’t know how much you’ll pay back
- You’re not informed of how this credit works
You want to be fully braced before taking out a loan that could be a threat to your financial stability instead of the other way round. Using the above points, you’ll assess your situation viz-a-viz the loan conditions to determine whether or not the credit suits you best.
How much money can I get with mini-credits?
Mini-credits are often small in nature and are used when in need of a quick financial fix. Their repayment is also short-termed and have high interest rates. Nevetheless, the loan limits may grow and conditions improve if we develop some loyalty with the entity. This greatly depends on the borrower.
Up to 300 francs
Up to 1,000 francs
Mini-credits have fewer eligibility criteria than other loan types, which is the reason why the lender may not risk giving big loans on first application. The lender will want to develop some level of trust with the loanee after several on-time payments.
Continued on-time payments of the loan without problems might lure the lender into giving bigger loans, increasing the repayment period, and reducing the interest rates.
Requirements to access loans in Switzerland
Requirements for taking out a loan in Switzerland vary with the entity and the type of loan. For instance, online mini-credits have fewer requirements than long-term loans.
Having in mind that an entity will not let you know why they disapprove your applications, it’s very important to know what exactly you need before contracting a loan. This will reduce the risk of registering poor credit history with credit bureaus (ZEK, CRIF, or Intrum Justitia).
Below are some of the most common requirements:
- You are of legal age. Some entities will not fund you at 18 years but will fund someone at around 21 and above. This is mainly because many 18-year-olds are still considered minors.
- Your level of creditworthiness: Entities in Switzerland, just like other countries in the world, will only be confident to fund you if you have a good credit history.
- Residence. Regardless of your nationality, you may get a loan with either permanent or a temporary Swiss residence permit. However, some entities will require holders of the temporary residence permit to have held it for between 6 months and one year.
- Some lenders will require that you have held a bank account with one of the banks within the country
- Income: You’ll also need to show proof of regular income of at least 30,000 francs per year before getting a loan. Some entities will finance you even without a fixed income.
Documents to be submitted when requesting a loan
The documents that these companies will request are simple and can usually be sent by uploading directly to the online form or by e-mail by scanning them or sending a photo. These are the documents that we must have ready to ask for a mini loan:
- Copy of your passport, ID card, or any valid form of identity
- The last three salary statements
- Copy of residence permit
- Bank account statements
An entity might require more documents depending on its conditions of operations and your situation. Many entities are reducing paperwork and opt to have their clients do an online application for loans because the process is fast and hassle-free.
How to take out loans online step by step?
Steps to contract a mini loan
- Choose the amount and repayment term
- Fill in the form
- Send the documentation
- Read and sign the contract
With online mini-credits, the loanee is able to get funded within 15 mintues. Since the application process completely online, lenders process the money quickly and send it to the lender in minutes. Good thing, the application process is hassle-free and involves fewer eligibility criteria. With some entities, the borrower will not need to submit their paychecks.
Let’s look at the 4 most common process you’re likely to follow when taking out an online mini-credit:
- The borrower requests their preferred loan amount and the repayment deadline through the enitity’s online platform. You’ll be required to select the amount of funds you need and after how long you’re able to complete payment.
- Be sure to fill out all the blank bars with the most accurate and honest personal information: full name, ID, date of brith, mobile number, address, and email, among others.
- The lender will assess our data through an online system and look out for anything that collides with our bank account, assessing our financial profile. This is the most critical step that determines whether our loan application is approved.
- After the lender approves the application, you’ll receive the contract details through email, which you’ll be required to read through noting down the contract details and eventually place your signature.
In the last step, be sure to note down the small print of the contract, to be fully informed about the terms of the contract.
A loan is meant to be good debt and should be used responsibly. Take out a loan only when you truly need it, can comfortably repay it, and can’t find an alternative source to avoid over-indebtedness.
Always be informed about the loan contract to avoid surprise payments to make in the future.
About this page, our methodology
About this page: we are passionate about helping you to get the best financial product that’s consistent with your financial situation. We, therefore, marshal the best available information about consumer credits and how to compare the options so you may end up with the most attractive offer at the moment.
Source: the information regarding the main characteristics of loans in Switzerland and their current regulation comes from the World Bank statistics and the Swiss Consumer Credit Act, among other reference portals.
Methodology: The data relating to the conditions of these products (amount, term, interest, etc.) have been obtained through online research and consultation of the official statistics of the aforementioned reference sources.
About Us: FUNDGECKO is an online comparator website specializing in personal finance and home economics products. We help our users not only compare the available financial products in the market but also provide rich information that will shorten the decision-making process and help them end up with the best offer.
Note: the services we offer are totally free for the user, as FUNDGECKO obtains its income from advertising and its featured products.