New in 2016: cancellation right, budget calculation and repayment period
- Author: Iohan Colarusso
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Cancellation right extended to 14 days
When taking out a loan from a financial institution, customers benefit from a period during which they have the right to withdraw from the agreement. The purpose of this right is to protect customers who sign too quickly, without fully realising the consequences of their commitment. This principle is known as the cancellation right.
Until now, Swiss law provided for a period of 7 days from the date of signature. However, from the 1st of January 2016 onwards, this period is extended from 7 to 14 days. Consumers therefore benefit from more time and are therefore better protected.
However, this change has consequences on the loan conditions: credit institutions are also changing the deadline for granting the agreed sum. Indeed, if the establishment lends the money before the end of the cancellation period and the customer withdraws thereafter, the situation could become difficult to resolve. Therefore, to prevent this risk, financial institutions are adding the cancellation period to the time required to release the loan.
Stricter budget calculation
Since the 17th of December 2015, the conditions for granting a loan have become stricter with regard to the budget calculation. The loan is governed by article 28 of the Swiss Consumer Credit Law.
Before granting a loan, the financial institution must have previously taken into account the customer’s expenses and income in order to determine the maximum loan amount to which the customer is entitled. Certain expenses are deducted from the income.
The principle is again to protect customers by prioritising expenses classed as fundamental, for example those involving children. What’s changed:
- since December 2015, consumers with dependent children under 6 must take into account 840 Swiss Francs per month and per child as childcare expenses. This sum is therefore deducted from the income when determining the customer’s borrowing capacity. However, the credit institution can be flexible in this area and not take into account this expense if the customer signs a waiver stipulating that he/she does not pay for childcare.
- the customer’s revenue is reduced by 190 Swiss Francs per month (previously 100 CHF) to take into account travel expenses.
- lunchtime meals, for which 200 Swiss Francs are deducted per month.
Extended repayment periods
Crédit Conseil has extended the repayment period. Previously set at 72 months (6 years), customers can now spread their repayments over a longer period of up to 84 months (7 years). This provides extra flexibility, thus easing repayment obligations and granting greater freedom. Moreover, spreading the loan out over a longer period helps customers reduce their monthly repayment amounts, making them easier to manage.
However, it should be noted that loans must be repaid before the customer reaches the age of 70. Therefore, this repayment period can only be granted to customers under 62 years old. Crédit Conseil offers simulations for this new repayment period via the tools available on its website.
- Categories: Consumer credit, News and information