Applying for a loan: procedure, tips and useful information

Whether it's to finance the purchase of a new car or make it through a tough financial period, you've decided to take out a loan. We’ll show you how – step by step.

Overview:

• What to do before applying for a loan
• Where you can take out a loan
• How to apply for a loan (and what documents you need)

Before applying for a loan

Step 1: do your research

Before you apply for a loan, you should familiarize yourself with the criteria. Not everyone gets approved for a loan. Credit capacity and creditworthiness play a role in deciding who receives a loan, along with other factors such as age, nationality, occupation, overdue debts, alimony and even place of residence. Learn more about personal loan eligibility criteria.

Step 2: work out how much you could borrow

Check your maximum loan amount

• You should check approximately how much a lender would offer you.

Your credit capacity is the key factor here. Loan amounts of up to 80,000 francs are subject to the Consumer Credit Act (KKG/LCC). To protect borrowers from over-indebtedness, the Consumer Credit Act states that a loan may only be approved if the borrower is in a position to repay the total amount (including interest) within 36 months using the seizable portion of their income.

Calculate approximately how much you can afford to borrow.

Interest

Lenders put out advertisements featuring their lowest interest rates, currently starting at 3.5%. A word of caution, however: these attractive but largely unobtainable rates are only awarded to people with an excellent credit score and under special conditions.

In order to determine your interest rate, lenders will review your personal and financial situation in detail. Certain eligibility criteria and risk factors determine not only whether you'll be approved for a loan, but also under which conditions. Essentially, the lower the interest rate, the stricter the eligibility criteria.

Use our loan calculator to see how different interest rates affect the cost of your loan.

Choose your repayment term

Lenders offer terms from 6 to 120 months. The longer the repayment term, the higher the interest payments. It's important to pay your instalments on time. For this reason, we advise you to give yourself some financial buffer when making your calculations. Late payments and debt repayment plans will impact your credit score. If you miss payments, the lender may choose to terminate your contract.

The best solution is to play it safe: choose a longer repayment term and pay more than the minimum instalments. According to Swiss law, you can always pay back your loans early, which will lower the amount of interest you have to pay. Learn more about choosing your repayment term.

Our tips:

So you’ve decided to apply for a loan?

You have two options:

Option 1: choose a reputable Swiss lender

• Use our loan calculator to get an overview of loan deals in Switzerland and compare interest rates.
• Take advantage of your right to obtain a free credit report in order to find out what information credit agencies have about you.
• Undergoing a credit check is a central part of being granted a loan.
• If you've already taken out loans or entered into leasing agreements, you can also request a credit report from the ZEK (in German and French only).
• Tip: submitting several loan applications at the same time so that you can compare offers will have a negative impact on your chances of receiving a loan.

A solid credit score and a secure source of income are the basic requirements for taking out a loan. Lenders also apply their own risk criteria but do not publicize them.

Option 2: submit your loan enquiry to Credaris via Comparis

• Credaris is a partner service of Comparis and specializes in brokering personal loans.
• Credaris offers a no-risk check of your credit score and eligibility.
• You'll receive an offer after undergoing a thorough background check.
• Upon agreement, Credaris will submit an application on your behalf to the lender most likely to approve you for a loan.

Learn more about Credaris.

Loan application

Step 1: submit your documents

Lenders and credit brokers first need some information about potential borrowers: their identity, credit rating and financial situation.

You will therefore need to submit the following paperwork:

• Salary statements for the past 3 months
• ID (identity card, passport)
• For non-Swiss residents: settlement or residence permit
• Often also a copy of your tenancy agreement

You may be required to submit additional documents later in the process, depending on your individual situation.

• For self-employed people: a tax assessment
• In some cases, further proof of your source(s) of income (e.g. bank credit notes for alimony or widow's pension)
• Proof of marital status (e.g. divorce/separation decree)
• When refinancing a loan: signed contract, bank details

Step 2: wait for your credit check results

Every potential borrower undergoes a credit check before being awarded a loan. Lenders request and analyze information on applicants such as their unpaid debts and past payment behaviour. The interest rate you receive depends on the results of your credit check. Having a positive credit rating lowers your risk in the eyes of the lender – and also your interest rate.

Loan agreement

If you are approved for the loan you applied for, you will receive a contract to sign. Contracts covered by the Consumer Credit Act can be revoked by the borrower within 14 days. After the 14-day period, the loan will be transferred to your bank account. Loans over CHF 80,000 can be paid out directly.

Loans covered by the Consumer Credit Act are only paid out after a 14-day cooling off period following the start of the contract. The idea is protect consumers, giving them time to change their minds and terminate the loan agreement. For this reason, “instant loans” (also called “express loans” or “quick loans”) are not offered in Switzerland, even though you may often see ads of this nature on the Internet. It is forbidden by law to use the term "instant loan" in advertisements.

Increase your chances of getting a personal loan

Loans are not suitable for solving ongoing financial difficulties or financing one-off activities like holidays or weddings. In order to protect consumers from falling into excessive debt, Swiss law has strict regulations regarding issuing loans. This includes checking borrowers' credit capacity, giving consumers a 14-day cooling-off period to change their minds, and allowing loans to be paid back early at any time. Taking out a loan is a long(er)-term obligation. You should therefore consider this decision carefully and make all the necessary preparations before submitting your application – for instance, requesting your own credit report and calculating how much you can afford to borrow.

Please note that every loan provider uses different criteria for their borrowers. It can therefore be difficult to assess your chances in advance. You should not send out multiple loan applications at once: this can lower your chances of being approved for a loan and negatively impact future loan applications. You can boost your chances by submitting a loan enquiry to Credaris, a partner service of Comparis. Credaris will review your profile free of charge and with no obligation, and give you an honest assessment of your options with respect to the loan you want.