Summary
La structure of a private credit contract in Switzerland is specific to each bank. It is a legal act governed by the federal law on consumer credit (LCC) on the one hand, and the Code of Obligations (CO) on the other hand.
Whether it is a car loan, motorcycle loan, construction loan, all types of consumer loans thus refer to the same legal texts.
It is essential to fully understand the main provisions of your financing before making a commitment, especially when applying for credit online.
The purpose of this article is to help you understand your financing offer.
The indications of the consumer credit contract are defined by Article 9 of the LCC. Some of the most important information is:
The total amount of your private credit
This is the total (or net) amount borrowed, including any amounts paid to other banks in the case of redemptions and optional insurance amounts taken out. It therefore does not always correspond to the amount paid into your account when the contract was activated.
It is advisable to have the bank or broker confirm the amount that will actually be paid into your account.
The interest rate for private credit
The effective annual interest rate (also called APR) is calculated using a Mathematical formula which is used to determine the total cost of credit granted.
It expresses as an annual percentage of the amount borrowed, all costs associated with borrowing, including interest and fees that the consumer is required to pay for private credit. The APR is fixed throughout the duration of the contract.
It differs according to the lending institutions, the level of risk of the borrower and the types of financing (consumer credit, leasing, credit cards). Actual interest paid during the year is tax deductible revenue.
Refund conditions
They specify the amount of the monthly credit payment and the number of payments to be made to repay the credit, interest and possible insurance.
The monthly credit payment corresponds to minimum amount to be paid. It is possible to make additional payments or to make an early repayment, to reduce the duration and cost of the credit.
The devil is in the details. Reading every word in a contract is essential to avoid unpleasant surprises.” - Warren Buffett
The total cost of your private credit
This is a theoretical indicative value based on a projected repayment of the contract. It does not take into account any ancillary costs such as reminder fees or interest rebates in the event of early repayments.
The seizable portion of income
This theoretical value represents the monthly repayment capacity of the borrower. It is calculated according to Federal law on debt enforcement and bankruptcy. This calculation is specified by the bank in the credit agreement..
The maximum credit amount corresponds to approximately 30x the value of the seizable portion of income.
Your rights in terms of early repayment
The borrower has the right to repay his private credit in advance. In doing so, he must benefit from a remission of interest and an equitable reduction in the costs associated with the unused term of the credit.
The borrower can make a spontaneous payment at any time, however the order of a Final countdown contact the lending institution to find out the exact balance. It is recommended that you check the effective termination of your contract with ZEK as part of an early refund.
Our article 7 tips for successful financing will allow you to learn more about this on the ZEK (tips 4 & 7)
Your rights and those of the bank regarding the revocation period
The borrower has the right to cancel his private credit request at no cost. within 14 days, according to article 16 of the LCC. The law provides for both a right of revocation and a revocation period. This period starts as soon as the loan offer is received. In concrete terms, this revocation is equivalent to cancelling the request for private credit free of charge.
Note that the bank has the same right and can cancel or modify its offer without justification. Do not incur expenses until you have actually received the funds.
Ancillary costs
There are several types of fees that are good to know and that are specified in the terms and conditions. These fees are added to the credit balance and will add to the final bill.
Among these, the administrative costs which are invoiced up to CHF 30.- depending on the establishment. These include reminder letters, duplicates of documents and the establishment of account statements, or even final statements.
Note that the payment of monthly payments to the post office is now invoiced by post to the lending institution which passes them on to the credit contract (CHF 2.- per payment).
It is recommended to set up best practices for limiting credit contract fees.
Delays in payments and consequences
When monthly payments are paid late, reminder letters are sent. As soon as the accumulation of delays reaches 10% of the contract, the entire debt becomes immediately due and a recovery process that can lead to prosecution then begins. At the bank level, the contract is then sent to the department responsible for debt collection.
The bank can offer payment arrangements in case of difficulties. Do not hesitate to contact your lending institution as soon as necessary.
Data processing methods and their marketing exploitation
By signing the consumer credit agreement, the borrower authorizes the Bank to exchange or collect information from the Consumer Credit Information Center (ZEK/IKO). This authorization also extends to numerous public and private institutions (e.g. tax authorities, office of control of inhabitants, economic intelligence companies, employers, landlords, etc.)
You can refuse the use of your data Personal for marketing purposes. This will prevent you from receiving commercial ads or calls.
The requirements in case of a change of address
The borrower is required to inform the lending institution in the event of a change of address. In the event of departure abroad, the balance of the loan becomes immediately due.
The level of coverage in case of death
Death insurance can go up to CHF 100,000. Elle is mentioned in the general terms and conditions. The level of coverage varies by institution. There are additional insurance coverage solutions that cover unemployment and incapacity to work.
The Money Laundering Act (CBD 20) provides that the identity of the beneficial owner, that is to say the person to whom the funds used to pay monthly credit payments belong, be verified. This is the main function of Form A.
Please note that Form A is a official act, integrated into the contract, which must be completed by the borrower.
Wrong indications can have criminal consequences, it is good to know How to fill out Form A. correctly
The payment order is a element of the contract that organizes the payment of funds. Although it seems rather formal, this order must imperatively relate to an individual account. Indeed, some banks refuse to credit the funds to a joint account and will return the funds to the lending institution.
Other documents complete the contract, such as the declaration of membership in the case of taking out insurance.
Finally the Fact sheet on consumer finance Switzerland (FCS) established by Société Suisse des Banques de Crédit et Establishments de Finances. This aims to make borrowers aware that unexpected events (illness, unemployment, divorce, etc.) can worsen their financial situation. It encourages borrowers to contact the lending institution in case of difficulties and to seriously consider the insurance solutions offered.
This information will hopefully allow you to have a better understanding of the subtleties of consumer credit contracts.
However, if you still have questions about your contract, know that the Credial team will be happy to help you see more clearly.
