Obtaining a personal loan from a bank or another credit organization is good. But taking advantage of a very advantageous interest rate is better! You will be amazed at how much the interest rates, for a loan of the same type and the same amount, can vary from one customer to another. How to explain these differences? In what ways do banks determine interest rates for each customer? How to get attractive interest rates? In this dedicated article, you will find answers to all these questions.
Are there limits to the interest rates charged by banks?
Personal credit is a source of debt for households. In order to protect them from over-indebtedness, the consumer credit law (LCC) imposes limits on the interest rates charged by banks and all credit institutions for individuals. This is the rate of wear. Defined by the Federal Council, it defines the limits on the interest that a bank can draw from a loan granted to an individual or to associations. Today, in Switzerland, the wear rate is set at 12%.
The wear rate changes quarterly. Failure to comply with this rate of wear is considered an abuse and leads to criminal penalties. Note, however, that this rate only establishes ceilings. For all variable rate loans, each credit institution is therefore free to set the interest rates. It will only take care not to exceed the maximum interest rates imposed by law.
Solvency: the first criterion of choice
Solvency is the first criterion taken into account by banks and credit institutions in determining the interest rate. It expresses your ability to repay a loan. Many factors are considered in determining your creditworthiness. The amount of your income or your debt ratio are particularly part of it. Ideally, your debt ratio should not exceed 33 % of your income. It is calculated from the amount of your income and that of all your regular expenses. Beyond this limit, your solvency may be called into question.
If you want to get attractive interest rates, you are therefore strongly advised to have good creditworthiness. It starts with good management of your finances and regular and sufficient inflows of money. Conversely, if your creditworthiness is low, the bank will take more risk by granting you credit. It will therefore compensate for these risks by applying a higher interest rate.
Credit history: a deciding factor
All information concerning loans and financing to individuals are listed in a database called ZEK. Les banques se réfèrent à cette base de données avant d’accorder un crédit à leurs clients, mais aussi avant de définir les taux d’intérêt. Vos antécédents financiers comptent ! Les difficultés à rembourser vos anciens prêts et les litiges avec vos anciennes banques peuvent encourager les banques à appliquer des taux d’intérêt élevés. En revanche, si vous avez toujours remboursé vos prêts correctement et n’avez enregistré aucun retard dans le règlement des mensualités, vos chances de décrocher des taux avantageux seront plus nombreuses.
The type of loan: a big influence on interest rates
The interest rates charged by banks also vary depending on the types of loans. Those applied to small consumer loans will be higher than the interest rates applied to private financing. The same is true for bank overdrafts which are also classified as personal loans. For example, it is possible that you owe more than 10% in interest on a credit card taken out to finance the purchase of household appliances since it is a consumer credit.
The amount and duration of repayment: factors to consider carefully
In addition to the type of credit, the amount and repayment term are also among the criteria for determining interest rates. You can take advantage of lower interest rates if you borrow large sums to repay on short notice. The longer the term extends, the higher the interest rate will be. Banks believe that long-term loans are more risky. This is why they charge higher interest rates if the repayment term is long.
A short-term loan is more attractive in terms of the interest rate. However, we must not forget that the amount of monthly payments is higher for this type of credit. Your debt ratio may therefore increase during the repayment period. Short-term credit is therefore recommended if you have high repayment capacities. Otherwise, opt for a long-term loan that will allow you to benefit from lower monthly payments.
The financial institution: a determining factor for the interest rate
Not all banks and financial institutions charge the same interest rates. For example, for the same personal loan, a bank can offer a credit rate of 9% against 6% for another bank specializing in consumer loans. This is explained by the fact that the applied tariffs are not the same. Some establishments tax advice or even administrative costs linked to credit due to a lack of expertise in this area. Others only take into account the amount of the amount borrowed and some management fees which make them more advantageous.
You can very well play on this difference in pricing to lower the interest rates on your loans. To do this, compare the offers offered by several financial institutions. Then choose the one that is more advantageous in terms of interest rates, but also repayment terms. Once the funding is accepted, don't miss your repayment deadlines as they will be registered with ZEK. They will then be consulted by the banks when you take out other loans in the future and you risk being refused your loan.
Lack of experience: the last surprising criterion!
And yes, some banks want to know the payment experience of a future customer. If the latter has never had private financing or consumer credit, its data will therefore be non-existent in the ZEK database and a higher rate may be applied for lack of information. Paradoxically, however, in some cases, it is better to have already had financing to obtain good conditions and a low interest rate.
And lica in all of this ...
We are a neutral and independent provider at your service to guide you on the best solution! We consult your data and then make sure to find you the best possible solution for your financing. As our services are 100% digital, you benefit in any case from the best market conditions thanks to our cashback system. Yes, you read that right, at Lica you receive cash in addition to your funding! Without further ado, do your request without obligation and take advantage of your financing as quickly as possible to carry out your projects.