What does a loan cost in Switzerland?

Consumer loans are suitable for raising additional funds in the short term, for example to finance a dream project or further education, or to increase your financial flexibility. Taking out a loan involves additional costs – how high these are, depends on the respective offer – and the differences are sometimes enormous. So, what do borrowers need to look out for to avoid unnecessary costs?

Consumer credit – What does the law say?

In Switzerland, the legal framework for personal loans of more than CHF 500 and less than CHF 80,000 is governed by the Consumer Credit Act. In addition to the content requirements for a loan agreement and the rights and obligations of the contracting parties, it also stipulates what interest rate is permissible for a consumer loan.

In 2025, the effective annual interest rate for cash loans is limited to a maximum of 11 percent. A maximum of 13 percent may be charged for credit card overdrafts. The maximum interest rate applies indefinitely, but is reviewed at least once a year and adjusted if necessary.

Total costs of a loan – How are they made up?

In addition to the APR (annual percentage rate), the cost of a loan is determined by the loan amount and the loan term. Based on these three pieces of information, it is easy to determine the total costs to be repaid when taking out a loan.

While borrowers choose the amount and term themselves, the APR is determined by the lender. This is a personalized interest rate that is determined as part of a credit check, primarily based on the borrower's credit rating.

Important to know: The APR already considers all the costs of the loan, such as processing fees. This standardization required by law makes it easy to compare different loan offers. Consumers thus have the opportunity to identify the most favorable provider at a glance when comparing loans.

Currently, the interest rates for consumer loans from most Swiss credit providers range between 5.9% and 10.9%. At LEND, top borrowers currently receive an interest rate of 4.5% and therefore the most favourable conditions in Switzerland. You quickly realize that you can save several hundred francs just by choosing the provider.

A cost example illustrates the potential. A consumer loan of CHF 30,000 with a term of 24 months costs borrowers a total of CHF 1,829 at an effective interest rate of 5.9 percent. With the most favourable interest rate on LEND of 4.5%, the interest costs for the same loan are only 1,397 francs. This corresponds to a saving of 432 francs. So, it pays to compare!

How much money can I borrow?

A rule of thumb says: if you can pay it back in 36 months, you can borrow it.

To find this out, you need to know what your so-called ‘disposable budget’ is. To do this, subtract your expenses from your income. Then multiply your disposable budget by 36, which is the maximum amount you can borrow.

Example: If you earn CHF 3,000 net per month and spend CHF 2,000, you have CHF 1,000 freely available budget. Multiplied by 36, you can therefore borrow up to CHF 36,000.

But beware: this is just a rule of thumb. The actual loan amount depends on a number of other factors, e.g. your credit rating, the term of the loan and the interest rate.

Term and loan amount – What to look out for?

By choosing the term and amount, borrowers influence the total cost of a loan. The following applies: the higher the amount borrowed, the higher the costs for the consumer loan tend to be. The same applies to the term. To save costs, it therefore makes sense to keep both factors as low as possible.

However, you should not be guided solely by the costs when making your choice.

The loan amount should initially be based on the intended use. More money is usually needed for a car loan than for the purchase of new furniture. If the exact costs are already known, the loan should be applied for in at least this amount.

Borrowers often make the mistake of not planning enough financial leeway. Especially if you have a low monthly income, it makes sense to avoid financial bottlenecks during the term of the loan by taking out a higher loan amount.

The same applies to the choice of term. Many borrowers are tempted to minimize this to save costs. 

However, a shorter term leads to higher instalments for the same amount. Another example to illustrate this: while the monthly repayment for a loan of CHF 30,000 with a term of 36 months and interest of 4.5% is CHF 891, this amount increases to over CHF 2,560 per month with a term of just 12 months. Depending on the monthly income, the financial leeway is drastically reduced in this case.

For this reason, borrowers should carefully consider what financial leeway they need during the term of the loan, consider other planned and unforeseen costs and choose the loan amount and term accordingly.

Incidentally, interest on personal loans is tax-deductible up to CHF 50,000, which at least reduces income tax a little.

At LEND, we want to offer our borrowers an individually tailored loan at the most favourable conditions. So feel free to make a loan enquiry.