A Comparis analysis has revealed that Swiss personal loan providers lure borrowers with extremely attractive rates that are often unachievable in reality. Even customers with a very good ability to repay do not often get the best advertised rate. If you don't compare, you could end up paying up to double the interest, depending on the lender.
Be careful when taking out a loan. Lenders assess the same customer very differently. Our analysis reveals that, depending on the lender, the same applicant can pay almost double the interest on a personal loan.
The financial impact can be considerable, as the following example shows: with a loan amount of over 20,000 francs and a loan length of 36 months, the different in interest is around 50 francs per month – in other words, almost 1,800 francs over the entire term of the loan.
“Some lenders offer better rates to homeowners than to those renting. This is understandable in terms of the risk involved: by applying such a hard exclusion criterion, lenders are creating what are described as “lighthouse” products. They advertise interest rates that are inaccessible to most customers,” says Comparis finance expert Frédéric Papp.
Very good ability to repay no guarantee of best interest rate
Are you an applicant with a “very good” ability to repay? Even then, you may not get the lowest advertised interest rate. For its analysis, Comparis used as its dummy customer an applicant with a credit score of between 500 and 550. The chosen profile was an engineer who lived alone, had a permanent employment contract, but no residential property or other assets, and had no family, debts or active debt collection orders. In spite of these circumstances, six of the nine lenders approached did not offer the Comparis customer the best interest rate advertised on their website.
Comparis tip 1: compare lenders
Although three out of nine lenders in the Comparis study offered the dummy customer their best rates, the difference between the best and worst offers was, at 3.45%, considerable. The lowest rate offered was 4.5% and the highest 7.95%. Says Papp: “Consumers must be more aware of the lack of transparency on the market. It’s more important than ever to be cautious and compare offers.”
Remember: rejections have a negative effect
But comparing is easier said than done: not all the criteria for obtaining a particular rate or being approved are available to the general public. And applying to multiple banks simultaneously in order to obtain the best offer can backfire: all loan applications are recorded at the Central Office for Credit Information (ZEK) (in German and French only). The applications stored at the ZEK are an important criterion for loan approval. A rejected loan application remains on file for two years and can have a negative effect on further loan applications.
Comparis tip 2: obtain ballpark interest rate online and seek advice
Use the online calculators provided online by the lenders to get an idea of a potential interest rate – with no obligation. Fill in the online form in full but do not submit the application. An independent loan advisor or broker can also be of assistance.
You can find more information in our latest analysis on misleading interest rates (in German, French and Italian only).