This moneyland.ch guide explains how to get the cheapest possible personal loan in Switzerland.
1. Only borrow as little money as possible
When getting a personal loan, you may be tempted to borrow more money than you really need. But borrowing more than necessary is best avoided: The bigger the loan, the more you have to pay for it, and the bigger the financial burden will be.
The amount you borrow dictates how high your loan repayments will be. On the other hand, the smaller the loan is, the lower the total cost of the loan will be. You can use the loan calculator to simulate the cost of different loans.
Find out exactly how much money you really need before you apply for a loan. Borrowing extra money for unnecessary spending is sugar-coated poison for your finances.
2. Compare loan price-tags
Swiss consumer loans are limited to a maximum legal interest rate. But below this maximum rate, there are major differences in the interest rates used by different Swiss lenders. Before you apply for a loan, you should always compare the offers from different lenders. The interactive personal loan comparison on moneyland.ch makes comparing easier.
Table 1: Cost of a CHF 20,000 loan with a 24-month loan term
| Service provider | Interest rate | Minimum total interest cost | Maximum total interest cost |
|---|---|---|---|
| CA Next Bank | 5.94% | CHF 1226.80 | CHF 1226.80 |
| Credit-Now | 6.9%-11.9% | CHF 1423.60 | CHF 2437.60 |
| Ècash | 7.9%-11.9% | CHF 1627.90 | CHF 2437.60 |
| Lend | 4.5%-10.95% | CHF 931.60 | CHF 2264.80 |
| Migros Bank (branch office) | 7.9% | CHF 1627.90 | CHF 1627.90 |
| Migros Bank (online) | 4.9%-7.9% | CHF 1014.40 | CHF 1627.90 |
Date: March, 2024. Selection of Swiss lenders. You can find the full comparison here.
The figures in Table 1 only show the minimum and maximum costs. The actual price you pay depends on your creditworthiness and other factors and could be the minimum, the maximum, or anywhere in between. Most Swiss lenders publish a minimum and maximum rate. Normally, the better your creditworthiness is, the lower the interest rate for your loan offer will be. That also means that you can get cheaper loans by first working to improve your creditworthiness.
Many Swiss lenders give you a discount if you own your own home. You can find a good overview in the moneyland.ch personal loan comparison.
3. Choose a short loan term
The quicker you pay off your loan, the less it will cost. Based on that rule of thumb, you should choose the shortest loan term that makes sense for you when applying for a loan.
Example: If you got a 20,000-franc loan with an effective interest rate of 7.9 percent, you would save around 1640 francs of interest charges by paying it off over 24 months instead of 48 months (see Table 2).
But you have to make sure that the required monthly loan repayment is not higher than you can realistically afford. The shorter the loan term is, the higher the loan repayments will be. Ideally, you should choose the shortest possible loan term that is realistic based on how much you can afford to repay each month. If you end up being able to afford higher payments, you can always pay off the loan faster than the agreed loan term.
Table 2: Loan costs by loan term (for a CHF 20,000 loan with a 7.9 percent interest rate)
| Loan term | Monthly loan repayment | Total interest cost |
|---|---|---|
| 6 months | CHF 3407.90 | CHF 447.40 |
| 12 months | CHF 1736.35 | CHF 836.20 |
| 24 months | CHF 901.15 | CHF 1627.60 |
| 36 months | CHF 623.30 | CHF 2438.80 |
| 48 months | CHF 484.75 | CHF 3268.00 |
| 72 months | CHF 347.05 | CHF 4987.60 |
4. Repay your loans ahead of schedule
If your financial situation allows for it, you should consider repaying the loan sooner than the pre-agreed loan term. The Swiss Consumer Credit Act gives you the right to repay loans early. The sooner you pay off the loan, the lower the total interest charges will be, so the less the loan will cost. The guide to repaying loans ahead of schedule explains how to do this.
5. Change your lender
The Consumer Credit Act allows you to change your lender at any time. Refinancing your loan can make sense if you find another lender that charges less interest. It is a good idea to check the latest loan offers every now and then, especially if you have a long-term loan. Note that you normally need a closing statement from your old lender in order to refinance your loan. Many lenders charge a fee for this document. You can find detailed information in the guide to refinancing loans.
6. Check peer to peer loan platforms
In addition to loans from conventional financial services providers like banks, you can also get loans from private individuals. Online peer-to-peer loan platforms act as a middle-man, managing the creditworthiness checks and administrating the loan. In some cases, you may be able to get a lower interest rate with a peer-to-peer loan. You can find more information in the guide to Swiss peer-to-peer loans.
7. Do not use credit card loans
Applying for a personal loan requires a fair amount of effort. That can make carrying balances on your credit card seem appealing – especially if you already hold credit cards, and thus do not normally need to undergo creditworthiness checks. But you should be aware that the interest rates of credit card loans are usually higher than those of personal loans. The maximum legal interest rate for credit cards is also higher than the one for personal loans.
8. Do not buy loan insurance
Loan insurance covers part of your monthly loan repayments if you are laid off or become disabled. Most lenders offer this insurance as an optional supplement for your loan.
But in many cases, getting loan insurance is not worth it. For one thing, the insurance premiums are very high. Additionally, there are many limitations and exclusions. Your income is already largely insured against these risks by unemployment insurance and disability insurance. You can find more information in the guide to loan insurance.
9. Think twice before getting a loan
No matter how cheap a loan is, it is never as cheap as not getting a loan at all. Carefully check whether you actually need a personal loan. You may have an emergency fund in a savings account that you can borrow from instead. Or you may own items that simply sit around and can be sold to raise money.
If you absolutely need the money, consider checking with your family and friends first. They may be willing to lend you money at a much lower interest rate. Just remember that private loans from individuals should also be recorded in a contract.
More on this topic:
What do Swiss personal loans cost?
Useful tips for using Swiss personal loans
Compare Swiss personal loans now
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