What you need to know about personal loans

The PostFinance personal loan helps customers put their plans into action. We speak to Tim Ackermann, the CEO of bob Finance, about the opportunities and risks that personal loans come with. The well-established Swiss loan and financing specialist bob Finance is the cooperation partner for the PostFinance personal loan.

What exactly is a personal loan?

Tim Ackermann: personal loans are also known as consumer credits. As lenders, we loan private individuals money that they are free to use over a certain period of time. As borrowers, you pay us interest on this sum of money. You repay the sum borrowed, plus interest, in monthly instalments over a contractually agreed term.

How common are personal loans in Switzerland?

Personal loans are one of the most widespread and sought-after financing solutions in Switzerland. According to the Central Office for Credit Information, around 120,000 personal loans with a total credit volume of 4.6 billion francs were granted to private individuals in 2023.

What do the Swiss take out personal loans for the most?

There are many reasons why people decide to take out a personal loan. People taking out a personal loan often have short-term financing requirements, for instance to purchase a used car or a top-quality bicycle, a kitchen, or perhaps for renovation work in general or buying things when moving house. Further education costs may also prompt people to take out a personal loan.

Let’s assume you already have a personal loan with another provider. Can you pay this off with a PostFinance personal loan?

Yes, that is possible. By doing so, borrowers can sometimes even save money seeing as PostFinance offers the personal loan from 4.90%. To pay off the loan, all you need to do is record the current loan when you apply for a PostFinance personal loan. You can use the PostFinance personal loan to pay off a current loan at any time, free of charge.

You often hear: “save up first, buy later”. What reasons are there to deviate from this principle? Or, to put it another way: when is a personal loan a sensible option?

This general principle is very sensible. It does, however, assume you have a choice and can plan in good time. This is possible in many instances. Nevertheless, unforeseen circumstances do occasionally crop up that require short-term investments. If you haven’t been able to make the necessary provisions for these sorts of circumstances in the past, a personal loan is most often the only way to finance a purchase. Depending on what you plan on purchasing, a loan also offers tax benefits over leasing.

What risks come with taking out a personal loan, and how common are they?

The biggest risk a personal loan presents is when you’re unable to make repayments during the contractual term, for instance in the event of unemployment. In this kind of situation, you have to factor in the possibility of payment collection measures in the worst-case scenario. This can have negative consequences beyond the loan agreement itself that need to be avoided.

To protect yourself in the event of unemployment, incapacity to work and disability, we offer a fee-based insurance policy that ensures your monthly repayments can continue should these risks arise. As lenders, we have a personal responsibility towards our borrowers. This is why we have imposed restrictions on ourselves to protect young adults, for example, from accumulating excessive debt. The result being that, in the past, only a very small portion of personal loans we granted could not be repaid.

What sort of questions do I need to be asking myself if I want to take out a personal loan?

All borrowers should carefully consider whether taking out a personal loan is right for them beforehand. Needless to say, as lenders, we also examine the creditworthiness of all loan applicants very carefully. This is also in keeping with the Consumer Credit Act (CCA) concerned with the protection of borrowing parties. With that said, any potential applicant should answer the following questions honestly for themselves before taking out a loan: would I still be able to afford the loan if I experience changes in my personal or professional circumstances? In the event of any questions or concerns, we recommend all applicants contact our customer service.

How is the interest rate and loan amount that I receive determined?

The interest rate determines how much interest borrowers have to pay on the loan amount. The interest rate and the maximum loan amount is determined on an individual basis for each loan application, and depends on personal and financial circumstances. One aspect we consider in particular is how reliably the individual will be able to repay the personal loan. If the person performs well, i.e. their creditworthiness is very good, then this will be reflected in a lower interest rate. The loan amount itself has no impact on the interest rate.

What do I need to do to make sure my personal loan repayments go smoothly?

We recommend borrowers set up a standing order over the course of the loan term. You pay instalments on a monthly basis at a consistent rate. A standing order will ensure you don’t forget a payment, and you also avoid any additional costs that you would otherwise incur in the event of a late payment.