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Hi there. We just moved to Zurich and are int the process of renting an apartment. We don't have thousands of francs on hand to pay the deposit, but I noticed there is a deposit insurance you can get which replaces the rental deposit.
My question is whether it is cheaper to buy deposit insurance or to get a loan and pay the deposit in cash.
Greetings,
Rental deposit insurance does not provide any real benefits for the renter. It simply acts as a guarantee that the landlord will receive their rent if you default on rental payments.
A rental deposit insurance policy does not cover damages to your rented home. You will have to pay for damages yourself (these are covered by personal liability insurance if you have it).
The only benefit of rental deposit insurance is that you do not have to tie up a larger sum of money in a rental deposit account. In exchange for this service, you pay a tidy annual premium.
A rental home with a CHF 2000 rent will typically command a maximum deposit of CHF 6000. The moneyland.ch rental deposit insurance comparison shows that an insurance policy for that amount costs between CHF 252 (cheapest policy) and CHF 370 (most expensive policy) in the first year. Over two years you would pay premiums of between CHF 504 (cheapest) and CHF 703 (most expensive). Over three years you would pay between CHF 756 and CHF 1055 in premiums.
So in the worst case, you would spend more than CHF 1000 on insurance over three years.
If you got a personal loan of CHF 6000, the interest you would pay would pay over a one-year term would come to CHF 144 (lowest interest 4.5%) and CHF 314 (highest interest 9.95%). If you repaid the loan over a two-year term, you would pay between CHF 304 (cheapest loan 4.5%) and CHF 613 (most expensive loan 9.95%). Over a three-year term you would pay between CHF 453 (cheapest) and CHF 921 (most expensive), as shown by the moneyland.ch personal loan comparison.
As you can see, getting a loan works out cheaper in almost every case. On top of that, money held in a rental deposit account earns interest. Currently, interest rates on rental deposit accounts are low, but you can still earn as much as 0.20% (at Crédit Agricole, for example). You can add the interest earned on the deposit to the amount you save by getting a loan.
Verdict: If your creditworthiness is good, getting a loan always works out cheaper than taking out rental deposit insurance. If you have poor creditworthiness or do not borrow money as a matter of principle, then rental deposit insurance provides a solution.
In either case, you should compare offers carefully because there are major differences in pricing. You can use the moneyland.ch personal loans comparison and the rental deposit insurance comparison to find the best deals.
Best regards from Moneyguru
