Information sheet on responsible lending

What are the hallmarks of responsible lending?

Personal loans are proven and modern financing instruments. In Switzerland, their granting is regulated by one of the strictest laws in Europe, the Federal Consumer Credit Act (KKG). There is a good reason for this regulation: its purpose is to protect borrowers from overindebtedness. Detailed advice on individual solution options, a serious examination of the credit application - based, among other things, on the information provided by the applicant - and information about potential risks are therefore an important concern of VSKF member institutions.

The focus is on the affordability of the loan for the borrower: the financing amount must be within the borrower's individual financial means. For this reason, the borrower's overall financial situation is analysed and a personal risk profile is drawn up for the assessment of the application. In this way, a sustainable financing amount is calculated from the individual budget, the repayment of which in monthly instalments leaves sufficient financial flexibility so that the borrower can use the financial leeway he has gained as safely as possible.

 

Strokes of fate should not lead to payment difficulties

The borrower must be aware that during an ongoing personal loan, unforeseen events such as job loss, accident, illness or divorce may lead to an unfavourable change in his income/expenditure situation. The borrower can minimize this risk by taking specific measures. Recommendations and principles for responsible borrowing can be found on the VSKF homepage (http://vskf.org).

If such events occur, it is always advisable to contact the financing institution. This may help to find a fair and acceptable solution in connection with the repayment of the loan and thus counteract a deterioration of the borrower's financial situation.

Taking out additional instalment insurance - if offered by the financing institution - can also help the borrower to protect himself against payment default due to involuntary unemployment, illness or accident.

In any case, borrowers are advised to seek personal advice from their financing institution.

January 2016

 

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