Increase in the maximum interest rate on consumer loans on 1 January 2024: the 2nd in less than a year
- Author: Iohan Colarusso
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On 1 January 2024, the maximum interest rate for consumer loans will increase by 1 percentage point to 12% for private loans and 14% for credit card overdrafts. This is the second increase in less than a year. What are the reasons for these successive increases? What are the consequences for borrowers?
In Switzerland, consumer loans are regulated by the Federal Consumer Credit Act and the Ordinance on the Federal Consumer Credit Act (LCC and OLCC). As per the Ordinance, the maximum interest rate is calculated on the basis of the “SARON 3-month rate”. However, after a long period of stability, the SARON surged in 2023, from 0.5% to 1.5%.
The Confederation had already increased the maximum rate by 1% on 1 May 2023 in response to an increase in the SARON. The increase announced for January 2024 is therefore the second in less than a year. The successive increases in the SARON and, by extension, in the maximum rate on consumer loans, are the result of a general rise in interest rates in Switzerland.
What does this new increase mean for borrowers?
Rising interest rates are making loans more expensive. Borrowing will be costing more. For example, for a cash loan of CHF 10,000 over 5 years, the maximum interest will be CHF 7,600 at the future rate of 12%, compared with CHF 6,850 at the current rate of 11%. That’s a -significant- difference of around CHF 700.
The new rates will also make it harder to access credit. This is because a borrower will need to have a higher repayment capacity to meet the higher costs. That is why we recommend that anyone wishing to take out a loan, and in particular borrowers on a low income or with a complex credit file, should be assisted by a professional broker.
- Important note: the increase in the maximum interest rate will only apply to new loan agreements entered into as from 1 January 2024. Existing loans will not be affected.
Our 6 tips for managing your loans
- Calculate!
The maximum amount you can borrow depends on your budget. This is made up of various elements, including your income, outgoings and outstanding loans. Banks will refuse your loan application if the amount exceeds your budget.
CC Crédits Conseils SA will calculate your budget and advise you on how to maximise your chances of obtaining a loan.
- Compare!
There are a plethora of credit institutions, so how do you choose?
Thanks to CC Crédits Conseils SA, which is now part of the Credaris Group, you will have immediate access to all banks offering private loans in Switzerland. What’s more, our advisers will always suggest the best solution according to your situation.
- Refuse!
Loans and credit where the interest rate exceeds the legal limits (as a reminder: 12% for private loans and 14% for card overdrafts from 1 January 2024) are considered abusive. In this case, you are only required to repay the principal loan capital, not the interest or additional charges.
A professional broker, such as CC Crédits Conseils SA, will only offer you deals that meet the legal requirements.
- Pay your bills on time!
Credit card issuers only deduct debit interest from the amount due at the end of the payment period (usually a month). But be careful: as well as debit interest, credit card institutions also charge reminder fees – which are not set by law and vary from one institution to another. To avoid unnecessary extra costs, be vigilant and pay your bills on time.
- Consolidate!
You may have several credit cards or may have taken out several loans. Managing all your instalments and repayments is no easy task.
The solution? Consolidate your loans or apply for a repurchase. You are sure to reduce your monthly costs and will only have one bill to pay. CC Crédit Conseils SA can help you find the right partner.
- Ask for advice!
As we have seen, private loan brokers take you step by step along the road to accessing finance, from determining your needs and budget to consolidating your loans and presenting you with the most beneficial offers. They will help you avoid the pitfalls of credit and will save you time… and money!
Cash loans and overdraft loans: what do they mean?
According to the official decision of the Confederation, the maximum interest rate will rise from 11% to 12% for « cash » loans and from 13% to 14% for « overdraft » loans.
A private consumer loan, known as a « cash loan », is a loan that a credit institution pays to a borrower in person or into a bank or post office account. The sum can be used to finance a personal project, for example to purchase a car or an electric bike, or even a trip.
A credit card overdraft, known as an « overdraft loan », is a loan granted by an issuer when a customer uses a credit card to make a purchase or to withdraw cash and does not pay the bill on time or only pays part of it.
There are many other types of loan, including leasing and current account loans. Your credit broker will tell you all about it and suggest the best option for you.
- Categories: Consumer credit, News and information