These are the most common reasons why a loan is rejected

1. The general conditions or credit capacity requirements have not been met

The legal requirements for getting approved for a loan are regulated by the Swiss Consumer Credit Act (KKG). Only adults who live in Switzerland or Liechtenstein, or are cross-border commuters, may receive a loan.

In addition, you have to earn enough to allow you to theoretically repay the personal loan with your freely available income within three years, including interest (credit capacity). In reality, loans are often granted over a longer term. Calculate your borrowing capacity according to the KKG using the credit limit calculator.

2. Your monthly budget is too low

The lender calculates your budget: can you repay the loan costs (credit and interest) in addition to your monthly expenses such as current leases, rent or alimony payments? This check is part of the risk assessment and mainly affects the approved loan amount and the conditions. If you are not at all creditworthy due to your budget situation, a provider may not be able to grant you a loan by law. Your application will be rejected in such cases.

3. You are involved in an ongoing debt collection procedure

If you can afford the loan you want based on your budget calculation, the bank or lender will then look at your creditworthiness. More specifically, this means that your payment history will be checked. An extract from the debt collection register is a key step for inspection bodies. For the credit check, however, equally relevant are the date of the entry and whether there are several debt collections.

If you have an entry, the lender will check your payment history. Some providers reject you immediately – others clarify how old an entry is and the reason it was made. However, you cannot take out a loan if you are currently subject to debt recovery and enforcement.

4. You have a negative ZEK entry

The ZEK (the Swiss Central Office for Credit Information) is an association founded by credit institutions and banks, which operates a Switzerland-wide database on credit information. The ZEK provides information on the creditworthiness and solvency of private individuals and companies.

The ZEK itself receives information about its members. They feed the ZEK database with information. They record loans and applications, rejections, current loans, credit and customer cards, and leases of their customers. Cases of insolvency or late payments of private persons and companies are also recorded in the database. One or more negative ZEK entries can have a detrimental effect on the lending process.

If you have previously lived in another country, the lender may also want to check your credit rating from your previous place of residence.

5. You are still in your probationary period at work

Your employment contract can be terminated at any time during your probationary period. This is an uncertain situation for the lender. You may or may not have to wait for the probationary period to be over in order to be considered legally credit-worthy. However, it is always the exception that proves the rule. Can you credibly prove to a bank that you will pass the probationary period at your job? Then, in certain exceptional cases, it may be prepared to grant a loan.

6. You have been self-employed for a short time

You've become self-employed and have invested your private reserves in the business. Getting a normal personal loan is difficult in this uncertain initial phase. For most lenders, regular and secure income is a mandatory requirement for granting a loan, and a minimum period of self-employment is always a prerequisite.

7. You are retired

Are you thinking of building a garden shed or buying a classic car? Today's pensioners still have many active years – and big plans – ahead of them. However, it's more difficult for them to obtain a loan.

There are two reasons for this: firstly, seniors receive OASI (AHV/AVS) funds, which cannot be seized. In other words, the lender may not use the OASI (AHV/AVS) pension in the event of insolvency. These funds may therefore not be included when calculating creditworthiness. However, receiving additional pension funds increases the chance of a positive credit decision.

The second reason is: the older you are, statstically the chances are higher that you will not be able to repay a loan due to health reasons or death.

8. You receive social benefits or disability insurance

Non-seizable income, such as benefits paid directly by the state, means you are unable to borrow. Many recipients of disability insurance still work part-time, which of course improves their credit capacity.

A loan is generally not suitable for dealing with long-term financial difficulties, and is therefore prohibited by law for good reason. Are you in debt? Find the right source of advice for you here: Debt counselling in Switzerland (link available in French and German).

9. You have been denied a personal loan for none of the above reasons

You have submitted all documents, including proof of income, and have checked again that you have neither an entry in the ZEK database nor in the debt collection register – and yet your loan application was rejected.

In this case, see the following non-exhaustive list for more possible causes. Depending on the lender, these points can have a significant effect not only on whether the loan is granted, but also on the term and interest rates:

• Residence permit: depending on the type of residence permit you have and the length of your stay, it might be difficult to apply for a loan.

• Restrictions for young adults under the age of 25: the lender may apply special guidelines for lending to people between the ages of 18 and 25.

• Borrower's expenditure: this is calculated differently by lenders and can have a huge impact on the estimated affordability of the loan.

• Employment: whether your employment is temporary or permanent, or whether you work on an hourly basis, is decisive when applying for a loan.

• Unemployment: a loan application will be rejected if you are unemployed.

• Many changes: frequent changes of residence, employment, etc., can also influence the risk assessment and thus the conditions.

10. What happens if a loan is rejected?

You need a loan and your application is rejected – usually without even giving a reason. What now? The requirements for a loan are very strict in Switzerland and the consequences of a loan rejection should not be underestimated.

If you do not receive the loan, this negative decision from the credit institution will be visible to all ZEK members in the ZEK database for two years. The entry will be retrieved every time you want a lease or credit card, or even just when you reapply for a loan.

This means that every rejected loan application leaves a trace on your credit score. The same happens with rejected leasing and credit card applications, late-paid invoices or a credit card being blocking due to a late payment.

11. My loan has been rejected. What now?

Has your loan been rejected, or are you still in the process of applying and want to make sure that you meet the requirements?

1. Check whether you meet all the requirements for a loan

• Find out whether you meet all the requirements for a loan.

• Check how your creditworthiness is assessed by the Swiss credit agencies. You have the right to see personal information stored about you, and can view your data at credit agencies such as Crif, Intrum, Dun & Bradstreet (only available in French and German) or Creditreform. Upon request, you will receive your credit information free of charge by post.

• Was your desired amount suitable for your financial possibilities, or do you have to adjust the sum? Calculate approximately how much you can afford to borrow.

• Debt collection is a common exclusion criterion. Check whether you can have past (paid) debts deleted from the debt collection register. Avoid applying if you are involved in ongoing debt recovery.

• Upon request, you can have unjustified ZEK entries deleted (link available in French and German).

2. Have your profile assessed before you submit a new application

Did the lender reject your last application for no specific reason? If so, you can try asking them about it. Credit institutions have different (and strict) requirements. It may well be that you have chosen the provider with the lowest interest rate (i.e. the cheapest loan) but this provider also has stricter conditions, or requires particularly stable employment, for example.