Types of loan in Switzerland
What are the rules for personal loans in Switzerland? Who can issue loans? What organizations are involved? Comparis explains.
Loans – a brief description
Loans refer to a payment made by a creditor to a borrower: for personal loans, this involves lending out money. Loans are awarded based on predefined conditions (e.g. costs, repayment terms) and have to be paid back within a certain period of time. There are secured and unsecured loans.
Two parties are usually involved in lending: the borrower receives the loan and is therefore the debtor. The creditor lends out the money. There are various types of creditors, usually banks or bank-like institutions.
What are the different types of loans?
The most relevant factors for categorizing loans are:
Whether the borrower is a company or a private individual
Whether the loan is secured or unsecured
Business loans can be broken down into short-term operating loans and long-term investment loans.
The most important types of loans for private individuals
Mortgages (secured with real estate)
Lombard loans: involve lending out easily liquefiable assets such as securities (secured loan)
Overdraft credit (for bank accounts)
Credit cards and store cards
What are the different types of personal loan?
Consumer loan: personal loans regulated by the Consumer Credit Act
Small or payday loans: colloquial terms without a precise definition
Loans for education and training: Splendit educational loans (not regulated by the Consumer Credit Act)
Loans for renovating property
You may encounter the following marketing terms in the context of loans:
Online loans, for which (most of) the loan application process is completed online. These are normal personal loans/consumer loans.
Instant loans – usually a misleading advertising term. Instant loans are not available in Switzerland as lenders are required by law to run thorough checks on potential borrowers.
Good to know:
As the name suggests, a small loan is a loan for a relatively small amount of money. It is usually used to bridge a short-term financial gap.
What is a microcredit?
From a legal perspective, there is no difference between a microcredit, a small loan, a cash loan and a personal loan. All these terms are often used to refer to a consumer loan as defined by the Consumer Credit Act (KKG) (link not available in English). The KKG lists the precise criteria used to define a consumer loan and the rules that must be observed when approving such a loan.
The terms “small loan” and “microcredit” are not without controversy, as they suggests low amounts of money and low risk. However, depending on the income of a borrower, loan amounts of a few thousand francs can significantly impact a budget.
How much is a small loan?
There is no official definition of a small loan in Switzerland. However, amounts under 500 francs are not covered by the Consumer Credit Act.
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Who can issue loans in Switzerland?
Swiss law distinguishes between commercial lending and non-commercial lending.
Financial institutions/credit institutions/banks: commercial lenders who grant loans to private individuals in Switzerland are mostly banks. This could mean a full service bank, a separate business unit of a bank, a specialized lending bank or a dedicated credit institution.
Crowdlending institutions: with respect to personal, business and real estate loans, the total loan volume issued by crowdlending has been growing sharply year by year. Crowdlending platforms act as brokers between lenders and borrowers. In this case, lenders are either private individuals or institutional investors (companies). Although crowdlending platforms do not issue loans themselves, they are still subject to the provisions of the Consumer Credit Act when handling personal loans.
Credit brokers: credit brokers are private individuals or legal entities that provide commercial brokerage services for personal loans. This means that they do not award loans themselves, but rather advise clients on their options and manage the lending process between the bank and the borrower. One example of this is Credaris.