Taking out a loan

Hints and tips on taking out a loan


A loan can free up your finances for many needs and help bridge the gap when your cash flow is tight. However, it is not easy to find the right loan. Our hints and tips for taking out a loan are designed to help you.

Instalment amount

You are advised to keep your repayment instalments low. This is because if you fail to keep up with your repayments, you may have to pay default interest and could risk receiving an entry in the Central Office for Credit Information (ZEK) register. This may in turn may prevent you from securing loans in the future.

Repayment term

Longer repayment terms have a positive effect on your monthly instalments. Your payments will be lower, which means you should still be able to afford them during months when your finances are tighter. So a longer repayment term is definitely recommended. But be careful – longer repayment terms also mean that the loan may be more expensive overall. However, you are not tied to the repayment term and can pay back the loan earlier if you wish. The quicker you pay off a loan with a longer term, the lower the actual cost of the loan.

Purpose of loan

The rate of interest applied to the loan may depend on what the money is being used for. It therefore makes sense to check whether a lender has a special deal for your particular purpose.

Timing

It is important to note that there is no such thing as an instant or express loan. According to the Consumer Credit Act (KKG), there must be a 14-day cooling-off period during which you can cancel your agreement. As a rule, no loans are paid out during this period. It's also worth bearing in mind that a proper credit check takes time. So if you require the money by a particular date, you should start working on your application well in advance.

Avoid ZEK entries

Since all loan applications are recorded at the Central Office for Credit Information (ZEK), you are advised not to submit applications to different lenders at the same time. If one of the lenders rejects your application, it is highly likely that the others will do the same. It is best to find out in advance the probability of your loan application being accepted by your chosen lender. Also bear in mind that lenders offering the lowest interest rates always apply the strictest criteria.  So try to avoid picking the first cheapest provider you find – check first how likely it is that your loan application will be successful.

Interest rate and credit score

The interest rates of most loan providers fall within a similar range. The rate you receive depends on how likely you are to repay the loan, in the opinion of the provider. Unfortunately, lenders do not disclose what criteria they use to assess this probability. They only insight you can get is from experience. The loan specialists at Credaris a partner service of comparis.ch, have this experience and would be pleased to help you find the most suitable loan.

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