In lending, the 36-month rule dictates that a person is creditworthy if they would be able to repay a loan in full within 36 months. The rule is based on a requirement in the Swiss consumer credit law (KKG) and is used to determine debt capacity for all types of consumer loans, including those with loan terms which are longer than 36 months.
Example: You get a 30,000-franc loan with a 10-percent annual interest rate. The loan term is 36 months. Your monthly repayment would be 962 francs. In this case, you would be considered creditworthy if your discretionary income which could be used to repay the loan was at least 962 francs per month.
But Swiss debt consultation offices and many Swiss lenders are not fully agreed about how this should be calculated for loans with longer terms. The point of contention is that borrowers incur costs for loans in the form of interest during every month of the loan term. The longer the loan term is, the higher the total cost of the loan is. While the gross calculation method accounts for the total cost across the entire loan term, the net calculation method only accounts for the lower cost which would apply if the loan were to be repaid within 36 months.
As a result, the calculated monthly cost is higher when the gross method is used. So a person could be considered creditworthy when the net calculation method is used, but be classified as not creditworthy when the gross method is used.
Example: You get a 30,000-franc loan with a 10 percent annual interest rate. The loan term is 72 months. If the loan were repaid over the full 72-month term, the monthly repayment amount would be 549.30 francs. The gross calculation would come to 39,549.60 francs (the monthly repayment multiplied by 72). You would have to be capable of repaying that amount within 36 months under the gross calculation method. So your discretionary income would have to be at least 1099 francs per month. On the other hand, when the net calculation method is used, the loan repayments are calculated as though the loan only had a 36-month term, without accounting for additional costs. So your discretionary income would only have to be 962 francs per month in order to qualify (see the first example above).
Swiss lenders tend to use the net calculation method. This lowers the barrier for getting a loan, or enables borrowers to get bigger loans than they could otherwise. Swiss debt consultation offices, on the other hand, prefer to use the gross calculation method because it reveals the actual, effective cost of a loan. The Swiss consumer credit law does not specify which method should be used for 36-month-rule calculations.
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