Refinancing Loans in Switzerland: Questions and Answers

In principle, getting a new personal loan to pay off an existing loan is not a good financial move because it increases your debt instead of decreasing it. But refinancing a loan with a cheaper personal loan can pay off in some cases.

How does loan refinancing work?

When you refinance a loan, you get a new loan from a different lender and use the money to pay off your existing loan. Refinancing only saves you money if the new personal loan is cheaper. The new loan normally has to be at least as big as the amount you still owe your current lender for your existing loan.

When you apply for refinancing, the new lender will normally require you to go through the entire application process and creditworthiness check from scratch. That means you will have to complete all of the same forms that you filled out for your initial loan.

Your new lender will typically manage the refinancing for you. That means they will send your old lender the money you owe based on the final loan statement. As with all consumer loans, there is a 14-day waiting period between the time your application is accepted and the time that the money is paid out.

What does refinancing a loan cost?

In Switzerland, you do not have to pay to terminate a consumer loan. That is stipulated by the Consumer Credit Act. You can repay a loan from a Swiss lender ahead of schedule at any time.

But when you refinance a loan, the new lender will generally require a final loan statement from your existing lender. Some bank charge fees for these statements.

Fees for final loan statements

*The final loan statement is free of charge, but you pay a CHF 150 fee for early loan termination.

Can refinancing a loan save you money?

The higher the effective annual interest rate of a loan is, the bigger the total cost of the loan will be. If you are busy paying off a loan that has a high interest rate and you are able to get a different loan with a much lower interest rate from a different lender, then refinancing your expensive loan with the cheaper one pays off.

You can easily find the lowest possible interest rates from Swiss lenders using the moneyland.ch personal loan comparison. You can also use the moneyland.ch loan refinancing calculator to quickly find out if you can save money by moving to a different lender. 

Is it always possible to refinance a loan?

While refinancing a loan can pay off in some cases, it is not always possible. The reason is that cheaper lenders in particular are more likely to have stricter criteria for granting a loan.

That is why it is important to get a confirmation from the new lender that your application is accepted before you terminate your existing loan. It is possible that the new lender has stricter criteria for loan approvals, and that you will not meet the requirements.

Can I get a bigger loan when I refinance?

When you get a new loan, it is often possible to borrow more than just the amount you need to repay your existing loan. But be aware that the bigger the loan is, the more you will pay for it.

You should also pay careful attention to the loan term. The longer it takes you to repay the loan, the more expensive the loan will be. With the possible exception of financial emergencies, you should avoid borrowing more than you need to repay your loan, or getting a longer loan term.

How should I go about refinancing a loan?

1. Compare interest rates: Compare your loan’s interest rate with the interest rates of other lenders using the personal loan comparison on moneyland.ch. If you find a loan offer with a lower interest rate, you can easily calculate how much you could save by refinancing using the moneyland.ch calculator.
2. Find out if you would pay fees: Check whether your existing lender charges fees for the final statement, and how much. If the fees are lower than the amount you could save by refinancing, then changing loans can pay off. Ask your existing lender for a final loan statement that accounts for all costs – up to the end of the following month, for example.
3. Apply for refinancing: Apply for loan refinancing from your prospective new lender. You will typically have to attach a copy of the final account statement to your application.
4. Terminate your existing loan: Once you have gotten a confirmation from the new lender that your loan application has been approved, you can terminate your existing loan. Make sure to only give notice once you have been approved for the new loan, as there is a chance that you may not fulfill the new lender’s criteria, and will not get the new loan.

More on this topic:
Repaying loans ahead of schedule in Switzerland explained
Swiss personal loan comparison
Loan refinancing calculator
Outstanding debt and early loan settlement calculator
Loan calculator