What’s the best way to get a loan in Switzerland ?
I want to make some investments, will a bank manager approve my loan or ask a ton of questions.
Any tips on taking out a loan in general. I’ve never taken a loan in my life so this is something new to me.
Do you have any collateral, or do you want to get a loan at 5+% ?
I have no collateral to offer (you mean like jewellery, precious metals etc) so will be at an APR.
Do you already have some larger investment amount? Then you could also get a margin loan. But please be careful with using leverage.
Yes, for the purposes here, let’s say that it’s for under 6 digits.
I don’t want a margin loan, buying on leverage is for the pros and that’s definitely not me
Taking a loan to invest is buying on leverage as CHRad stated
Loan info I found is here, seems to be a great starting place.
I’d indeed start with Moneyland or Comparis, then, if you have a banking relationship you trust, you could arrange a meeting with them and having the results of the Moneyland search as a tool for discussions (otherwise, just go with the Moneyland results).
More than interest rates, amortization requirements is what kills regular loans as a vehicle to get leverage for investment in Switzerland, in my opinion. I’ll be interested to know if you find a useful product but my searches have led to me thinking that, in Switzerland, loans only make financial sense when they serve to finance a real hard asset like your own business or a home.
The only types of loans I’d consider:
- Line of credit for a business
- Loan for the purchase of a car instead of financing it with a lease (though I’d rather just choose a relatively cheap car and pay it cash)
- Margin/Lombard loan
Note that all these loans are secured with some type of asset, which is what allows lenders to offer you decent terms. Unsecured loans have nothing to offer to a cold headed investor who assesses risks and rewards properly: for the lender, you are the credit risk, they’ll make sure to be properly compensated for taking it and they have access to the same investing vehicles as us.
Furthermore and as pointed out by others, I’d consider the portfolio as a whole. Investing while having any kind of loan means investing on leverage: the money required to serve the loan comes from somewhere and you can’t keep your assets if you declare bankruptcy, so if things turn to the worst, you’ll end up selling stocks anyway.
Other sources of leverage for investing in securities:
- options and futures (please, do take the time to fully understand them before giving it a shot).
- leveraged ETFs (same, do your due diligence)
For context: I’m a big fan of the theory of lifecycle investing but yet, I am not leveraged because all of the above solutions come with too many negatives to be worth using in my opinion.
What do you want to use it for? What kind of investment?
If you borrow money to invest, you should think carefully what are the costs of borrowing. From my point of view it doesn’t make sense to borrow at (definite) 3% p.a. to (maybe) earn 5% p.a. on borrowed amount. And if you have mortgage, you are already heavily leveraged.
For leveraged investment in standard indices the cheapest borrowing rates seems to be those embedded in futures. So buy 3-4 MES futures, and you have your 5 digits loan.
Educate yourself first.
The general rule in Switzerland is that the purpose of the loan (what you want to do with the money) is completely irrelevant. You could literally blow it all on hats if you feel like it.
Lenders look at:
- Your residence status (Are you settled in Switzerland or might you take off without paying your debt?)
- Your income
- Your expenses
- Your existing debts/liabilities
- Your credit history (debt collection register, ZEK)
If you are permanently settled in Switzerland, employed with a steady income, have a low ratio of expenses compared to your income (i.e. a high savings rate), have no existing debts, and have no entries in the ZEK or debt collection registers, then you will generally be approved.
The Swiss consumer credit law requires lenders to do take concrete steps to prevent over indebtedness. If a borrower can prove that a lender gave them a loan when there was a risk of becoming over indebted, the lender may have to forgive the loan. That is why having a high income-to-expense ratio is so important.
In some cases (having a lot of kids, for example), you will generally be rejected even if you save a lot of your income because lenders use average living expenses (not mustachian ones) as their guide when determining whether you can afford a loan.
You can get an unsecured loan, i.e., Privatkredit from Bank Now or better yet, Migros Bank. Migros Bank charges as little as 4.7%. However, you need high debt to income ratio and for the lowest rate, you need to be a home owner. You can take out a Privatkredit for any purpose. They need paystubs and possibly your tax return. The will evaluate the “Tragbarkeit”, i.e., debt-to-income ratio.
Somebody already alluded to the Lombardkredit (margin loan) if you have existing liquid assets. You can negotiate the rates on Lombardkredit.
Your timing might turn out to be very good, given the recent selloff in all manner of investments.
I am going to jump on the back of this thread rather than starting a new question:
- If you already have a Swiss mortgage, can you ask to borrow more?
I have a colleague who extended his mortgage here in order to pay off a debt in the UK, but I was wondering if you could borrow more on your Swiss mortgage to buy a house outright in the UK or abroad? Does anyone have any experience with this?
- What is the ratio of lending to ones salary in Switzerland?
Once more, the good advise of VZ Bank may well make you end under social assistance in ten years. The example seem brilliant but is limited to a time scale of ten years. Nobody is eternal but your life expectancy may well be over ten years, even if you already are 70 years old.