Are you looking for a loan from a bank, agency or advisor? What should you pay attention to before requesting a credit offer? Our advice and explanations.
A highly regulated market
In Switzerland, the credit market is generally well supervised. The LCC (Consumer Credit Law) defines a set of rules that market players must comply with. Certain articles of the LCD (Unfair Competition Law) also refer to consumer credit and reinforce security for borrowers.
If lenders are well regulated, and the interests of consumers are properly defended, exceptions exist and care should be taken. Certain elements should therefore be systematically checked when requesting a credit offer.
Application fees and associated costs
When it comes to consumer credit, brokers and credit agencies are paid directly by the banks. Therefore, be careful when requesting a credit offer:
- If fees are requested for processing the file
- If additional costs are mentioned
Normally, agencies and brokers do not charge any fees for studying the file and putting together an offer. This is of course valid for the personal loan. In the case of an SME loan or other services for SMEs, it is not uncommon for fees to be requested.
As with everything, beware of credit offers that seem “too good to be true”. In Switzerland, consumer credit generally has a rate of 5.9% to 10%, not less. An offer touting a lower rate will most likely be a scam.
The duration of the loan is an element often overlooked by borrowers, who easily forget that the cost of the loan is directly proportional to its duration. For the same rate, a 24-month credit will cost a total of twice as much as a 12-month credit. To compare the offers, it is, therefore, advisable to compare the proposed durations. It is sometimes better to choose a proposal with a slightly higher rate, but which allows a shorter repayment period.
Reason for credit
If it happens that the reason for the credit is requested, you should know that this information is not necessary. Many banks and agencies offer loans without asking why. The money can then be freely used.