How To Get a Loan in Switzerland [2023 Guide]
Switzerland is one of the most expensive countries in the world to live in, and as a result, many people find it a challenge to get by without a loan. While getting a loan in Switzerland is not an easy task, there are a few ways that you can improve your chances of getting approved.
Generally, foreigners living in Switzerland are eligible for a loan. To get one, you should find a lender whose terms suit your needs. Depending on the bank, you’ll present your identification documents and other requirements showing proof of income. The institution will then assess your creditworthiness to determine if you’re eligible for a loan.
The loan application process in Switzerland can be challenging, especially for a first-time applicant. This article covers everything you need to know about loans in Switzerland, from the application process to requirements and providers. Read on to find out if your employment status can affect your loan eligibility.
Can a foreigner get a loan in Switzerland?
You can get a loan in Switzerland as a foreigner, but there are requirements you should meet to qualify for one. It also depends on the duration you’ve been living in the country and your residence permit.
Living in Switzerland is expensive, especially if you’re a foreigner. This is because gaining a financial foothold in the country can be challenging. For this reason, you may be wondering if you can get a loan as a foreigner to overcome financial hurdles.
To qualify for a loan in Switzerland as a foreigner, you must fulfill the following requirements:
- You must be aged between 18 and 65
- You must have a regular income
- Your credit score should be positive
- You must have lived in Switzerland for a minimum of six months
- You must have a class B, C, or G residence permit
If you want to open a bank account in Switzerland, check out this guide.
Loan requirements for foreigners in Switzerland
To qualify for a loan in Switzerland as a foreigner, there are requirements you should meet. These are based on the following factors:
Young and old people below 18 and above 65z, respectively, may not qualify for a loan. Those between the ages of 18 and 25 face more restrictions like increased interest rates and loan limits. Lenders do this to avoid defaults by young people because their finances aren’t yet solid.
Before getting a loan in Switzerland, lenders will assess your employment status to confirm if you have a regular income. These include:
If you work for a long duration for one employer and you’re under permanent employment, you’ll get loans with lower interest rates.
If you’re a foreign temporary employee, to qualify for a loan in Switzerland, you must have held the position for a minimum of one year.
You’re considered self-employed if you have a sole proprietorship or have shared in a limited liability company. Most lenders are reluctant to grant loans to self-employed people in Switzerland because of fluctuating incomes. To qualify for a loan, you must have run your business for at least two years.
Financial institutions in Switzerland don’t grant loans to these employees because they can’t prove the presence of constant income.
3. Debt enforcement/bankruptcy
If you’ve ever filed for bankruptcy, you’ll not receive a loan in Switzerland. This also applies to anyone who’s been garnished.
Your creditworthiness determines your loan repayment capability. If you’re financially trustworthy, you’ll receive loans at lower interest rates.
Credit providers consider alimony when assessing your loan eligibility. Since alimony paid is an expense, lenders take it into account when determining your creditworthiness.
6. Residence permit
Depending on the type of residence permit you have, there are more loan requirements you should meet. Let’s look at each of them in detail.
Class C residence permit
If you have a class C residence permit, you possess equal credit terms as Swiss residents. These terms are as follows:
- Be 18 years and above.
- Earn a regular monthly income of at least CHF 2,600.
- Provide a salary statement if you’re employed or an annual statement for the self-employed.
- You should have no certificate of loss or open garnishments.
Class B residence permit
You can apply for a loan in Switzerland as a foreigner holding a class B residence permit. However, you should meet the following requirements.
- You should be over 18 years.
- You must earn CHF 2,600 and over every month.
- Provide proof of income.
- You should have no open garnishments and certificates of loss.
- You must have lived in Switzerland for a minimum of three months.
- You must have had the permit for 6 months and above.
Class L residence permit
With the L residence permit, you qualify for a loan in Switzerland. All it takes is a fulfillment of the following conditions:
- Fulfill similar terms as of holders of class C residence permits.
- Be a class L residence permit holder for a minimum of 3 years.
- You must be working in Switzerland.
Other than holders of the permits above, cross-border commuters working in Switzerland are eligible for loans in the country. These include people living in Italy, Austria, France, or Germany but are employed in Switzerland.
Documents for a loan application as a foreigner in Switzerland
Other than the requirements, before qualifying for a loan, there are documents you must present to the lending institution. The type of documents you’ll require depend on the following factors:
An employee holding a permanent position
- Valid ID documents, which can include a Swiss passport and your residence permit.
- Previous three months’ payslips.
- Health insurance policy.
- Valid ID documents.
- Previous six months’ payslips.
- An employment contract.
- Health insurance policy.
- ID documents.
- Copies of municipal and cantonal tax assessments.
- Three previous wage slips alongside credit notes.
You can apply for a loan in Switzerland as a pensioner, provided you can make repayments before you turn 70. You’ll need the following documents:
- Valid ID documents.
- Current pension decree.
- Three last credit account statements.
- Health insurance policy.
Whether you’re taking a loan as a couple
Taking a loan as a couple in Switzerland increases your chances of qualification than when doing it on your own. For this, you’ll need the following documents:
- Valid ID documents for both of you.
- Previous three months’ wage slip alongside a credit note.
- Health insurance policy.
The process of getting a loan in Switzerland
Just like any other country, getting a loan in Switzerland involves a series of steps. Follow the steps below to ensure that you don’t miss out on any important detail that can hinder your loan approval chances.
1. Choose a lender
Since lenders have different lending criteria, it’s essential to assess their interest rates and choose the one that suits your situation. You’ll pay a lower monthly installment if you choose a longer repayment term. However, the overall cost of the loan will be higher. For instance,
|Loan X||Loan Y|
|Loan term||3 years||2 years|
|Monthly installment (CHF)||593.27||484.77|
|Total loan cost (CHF)||21,357.88||23,268.96|
2. Submit your documents
Before processing your loan, lenders will need to gather your personal information, including your credit score, identification, and financial situation. They’ll submit your details to the Central Office for Credit Information (ZEK), who’ll give them your information. Generally, you’ll need to present the following documents:
- Your last three salary statements.
- A valid ID, passport, or residence permit.
- Some lenders ask for additional documents like a tenancy agreement and health insurance policy.
- A tax assessment if you’re self-employed.
- A marital status proof.
3. Wait for your credit score results
Just like every potential borrower, you’ll undergo a credit check to determine your loan eligibility. The lending company does this by analyzing your unpaid debts and payment behavior. Based on the lending company’s risk assessment policies, you may be asked to submit additional documents for this step.
You’ll get results within 24 hours. If you get a positive credit score, you’ll be eligible for a loan. If you score negatively, your loan application will be rejected. The lending company then sends your rejection report to ZEK.
With this information in ZEK recordings, accessing loans in the future can be difficult. However, getting a rejection in one institution doesn’t mean you’ll be rejected in others. To avoid multiple rejections, thoroughly review your application before submitting it to lenders.
4. Loan agreement
Once your loan is approved, you’ll be required to sign a contract. If the Consumer Credit Act covers the contract, you can revoke it within 14 days. When the 14-day period elapses, the amount will be sent to your bank account.
The reason for the 14-day withdrawal period is to protect borrowers from excess debts and give them a chance to terminate the agreement
Personal loans in Switzerland: what you need to know
Before applying for a personal loan, it’s vital to understand the terms and conditions. In Switzerland, a personal loan is one that fulfills the following factors according to the Consumer Credit Act.
- The loan’s purpose should be personal and not commercial or professional.
- The loan amount should be between CHF500 and CHF80,000. The maximum amount you get is determined by your expenses and income.
- The repayment period should be three months and above.
- The loan doesn’t require collateral security which can be in the form of assets.
Personal loans in Switzerland have numerous legal and formal requirements, which are governed by the following agencies:
- ZEK, which gathers and provides information on borrowers’ credit histories
- Information Center for Consumer Credit (IKO)
- Anti-money Laundering Act (AMLA)
- Swiss Federal Department of Justice and Police (FDJP) sets the maximum interest rate for personal loans.
Criteria for personal loans
Credit score: Before your loan is processed, you’ll be thoroughly checked for eligibility. Your credit history and past loan repayment abilities will help determine your credit score.
Minimum and maximum loan amounts: For a loan to be considered a personal loan in Switzerland, it must range between CHF 500 and CHF 80,000.
Repayment terms: The repayment term for personal loans is not less than three months, according to the provisions of the Swiss Consumer Credit Act. Personal loans are payable in installments for the repayment period.
Although the repayment terms vary among lenders, most range between one and ten years. There are lenders who provide early repayments without penalties, and others charge for early repayments.
It’s essential to make your personal loan repayments on time to prevent penalty payments and attract a bad credit score. If it’s challenging to make repayments on time, contact your lender before the due date to see what options are available.
Interest rate: Currently, the Consumer Credit Act has set the maximum interest rate on personal loans to 10%.
Withdrawal period: Borrowers have up to 14 days to withdraw from a personal loan agreement. That’s why these loans are payable two weeks from the day of the contract.
Loan providers in Switzerland
Before taking out a personal loan in Switzerland, you need to learn about the different providers and interest rates. This helps you choose one that suits your personal situation. Below are some of them.
|Loan provider||Interest rate||Repayment period||Monthly installment (CHF)|
|Bob credit||4.9% to 9.9%||6 to 120 months||298.75|
|Cashgate||4.9% to 9.9%||6 to 84 months||311.65|
|BCGE Personal credit||5.9% to 9.9%||6 to 60 months||305.20|
|BCVS||8.95%||3 to 60 months||303|
|BCJ||3.9% to 5.9%||3 to 48 months||303|
|Micros Bank||4.7 to 5.9%||6 to 84 months||297.90|