Problems with taking out a loan
Loans with bad debt or without any form of credit check? This is how unscrupulous “lenders” lure unsuspecting borrowers. These deals are often fraudulent. Find out here how to identify loan scams and protect yourself against them.
In principle, loans are to help you get through temporary financial difficulties. Loans are less or not at all suitable for structural financial difficulties that can only be postponed by taking out credit.
What to do if you are in debt
Create a budget yourself to get an overview of your financial situation. Templates are available from the Swiss budget counselling service Budgetberatung Schweiz (in German, French and Italian only) as well as from various banks and insurance companies.
Should you find yourself in serious financial difficulties, don’t hesitate to contact a debt counselling service. Possible organizations include Verein Schuldenberatung, Caritas Switzerland debt counselling service and the debt counselling services provided by your canton of residence (links available in German and French only).
Research the bank or lender before submitting a loan application. To do this, read the tips under loans without the ZEK
5 tips on how to protect yourself from untrustworthy providers
Do your research on the bank or lender. All reputable lenders are members of the ZEK (website available in French and German).
Be aware that dishonest debt consolidation companies advertise loans but charge fees for questionable services instead. Inclusion of terms such as “broker’s commission” or similar indicates that this is not a legitimate lender, as personal loan brokers are not allowed to charge customers any fees.
Consult the list of public warnings regarding fraudulent lenders provided by the Swiss Financial Market Supervisory Authority (Finma). You can also search for customer feedback in online forums, for example.
Check Zefix, the commercial register, to find out who is behind the website. Even if “.ch” appears in the URL, the organization may be a letterbox company.
Check how the lender advertises its products. If they use phrases such as “instant loans” or “get approved in minutes” or similar, proceed with caution. Check the legitimacy of the lender using other sources.
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Caution is advised in these cases
Some dubious providers advertise online with misleading statements such as “loans without a credit check” or “payout in minutes” to take advantage of the financial situation of loan seekers. However, such offers are prohibited in Switzerland. Caution is advised in the following cases.
You will often see adverts for “bad credit” or “bad debt” loans. These ads target customers experiencing serious financial difficulties. Reputable lenders do not use such slogans in their advertising. They examine the credit capacity of their applicants carefully in order to protect them from falling into excessive debt.
Whether you are in ongoing or completed debt enforcement the credit provider reviews the file very carefully. A debt collection order is often a reason for a loan to be rejected. In all cases, it will have a negative effect on your credit standing and will affect your chances of being approved for a loan and/or the conditions offered.
Terms such as “express loans” and “instant loans” promise fast access to money. However, these deals are offered almost exclusively by fraudulent lenders. According to the loan industry’s self-regulatory code of practice, lenders are explicitly prohibited from using the term “instant loan” in their advertising. In addition, the Consumer Credit Act stipulates a 14-day cooling-off period before a loan may be paid out.
The Consumer Credit Act stipulates that all lenders must report all issued loans to the Information Centre for Consumer Credit (IKO). Providers of peer-to-peer loans (often abbreviated to P2P loans) have also been subject to the Consumer Credit Act since April 2019. In addition, reputable lenders are members of the Central Office for Credit Information (ZEK). This organization keeps records of all the loans issued by its members and provides information in response to member requests regarding loan applications. This means that it is impossible to obtain a loan without a ZEK disclosure or credit check.
If a lender fails to comply with the applicable regulations, it can face legal action. So be careful if someone tries to offer you a loan that requires no credit check or ZEK disclosure. It could be a scam.
Many loan applicants end up using a debt consolidation company without realizing it. These companies are usually advisors and not lenders. Of course, there are legitimate as well as fraudulent debt consolidation companies.
Applicants to these organizations, which are also known as debt relief companies, usually receive a contract to consolidate their debt. With this arrangement, you don’t get a loan, but must pay the company for the services provided.
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Loans in difficult situations
Certain factors such as debt collection, ZEK entries or other debts can make it difficult or even impossible to take out a loan. Before getting a loan, you should therefore find out whether it is right for your circumstances, and what you need to bear in mind.
