Calculation of the maximum amount of your loan in Switzerland
Are you planning to apply for a loan in Switzerland? Do you want to calculate the maximum amount of credit you are entitled to? We will be happy to give you our advice by email or by phone.
The criteria set out in article 28 of the LCC (Federal Consumer Credit Act) are used only in the case of loans of less than USD 80,000, while the law does not concern loans of a higher entity. The intent of the legislation is to protect consumers from over-indebtedness: in fact, only those loans can be granted in Switzerland that those in debt are able to easily repay based on their economic situation. For single persons only income and expenses will be taken into consideration. For families, on the other hand, the income and expenses of the whole family budget will be considered (here you can find more information on this topic: Loan for two).
How is the maximum allowable amount of your loan calculated? Broadly speaking, the formula can be summarized as follows:
The following applies to every family budget: Income – Expenses = Free monthly amount
Maximum loan amount = Free monthly amount x 36
Example Family budget: USD 5,000 (Income) – USD 4,000 (Expenditure) Margin available every month = USD 1,000
USD (Margin available every month) x 36 months = 36’000 USD (Maximum credit amount including interest). To evaluate the repayment capacity of the loan applicant, a period of 36 months must be taken as a reference, even if the stipulated duration is longer.
A thousand free USD each month allow a loan of up to USD 36,000
Compliance with this method of calculating the family budget is established by Swiss consumer protection law. However, many banks are unwilling to lend until the maximums established by law are reached. For example, we are aware of cases where the Cream bank has rejected loan applications for an amount equal to only 60% of the maximum permitted level. Furthermore, most banks do not accept any offer equal to the maximum amount, but in that case simply refuse it. A Best Bank, on the other hand, is happy to assist you in the application process and budget optimization, so that you can get the maximum amount possible together with the lowest interests.
For this reason, we analyze your financial situation with extreme care, considering, for example, the income of your partner, the scholarships, the apprentice salaries and other incomes that are part of the family budget, thus optimizing your budget. On the expenditure side, let’s take for example the reduction of insurance premiums. In case you already have loans in progress, it is worthwhile to consolidate the credit and in this way save interest by also obtaining a greater share of free income. In this way it will be possible to “take two pigeons with one stone.
Amounts in excess of USD 80,000
For amounts greater than USD 80,000, however, banks are not obliged to comply with Article 28 of the LCC and can grant loans that are clearly higher than the maximum allowed amount, which can be calculated through the budget calculation. In this case, however, the solvency of the person requesting the loan is carefully checked.
Reasons for refusing credit
The amount of credit as a cause for refusal
In this case, the request is rejected because the share of the free family budget is too small. In the event that a request for credit exceeding the limits allowed by law is presented, this must be refused. Thanks to our calculation systems we are able to evaluate with maximum precision the maximum amount you can aspire to given your economic situation. In turn, the possibility of refusal due to a lack of solvency is measured, which is verified with a request to the ZEK and to the Cantonal Office for Executions and Bankruptcies. If you already have open debt positions, it will be difficult to receive credit. If you then have foreclosures or a certificate of shortage in Switzerland, you will not find anyone willing to grant you a loan.
Conclusion: The maximum loan amount that you can receive is calculated by comparing income and expenses within your family budget. The legislator has established with the consumer protection law that for amounts less than USD 80,000 the maximum amount corresponds to the free share of the family budget multiplied by 36. Best Bank, our financing company, will be happy to help you obtain a loan of the maximum amount possible and at the lowest interest, so that you can both optimize your budget and the credit request.