How to Recognize Fraudulent Loan Offers

If you use online forums, search engines like Google, social media platforms like Tiktok, Whatsapp, Youtube, or Facebook, and messaging apps like Whatsapp, you have likely come across ads, comments, or pitches advertising loans. If you need money, these offers can seem very tempting, especially if you cannot get a personal loan from Swiss banks and other established Swiss lenders.

But be careful: Many of these offers are either direct or indirect scams. Here, moneyland.ch lists red flags that point to fraudulent loan offers, so that you can recognize and avoid them.

Red flag 1: Get a loan in spite of being refused by banks

Some disreputable loan brokers claim that they can get you a loan even though you have been turned down by banks and other lenders. As a general rule, lenders’ requirements for getting a loan are the same whether you apply directly or through a loan broker.

Reputable loan brokers and lenders will never offer to help you get a loan if you do not meet the criteria for getting Swiss personal loans. As a general rule, avoid any brokers that claim they can get you a loan even though your direct loan applications were already refused.

Red flag 2: Get a loan in spite of a negative entry in the ZEK or a debt collection register

Swiss lenders will not give you a loan if there is a negative entry on your ZEK credit history or in a Swiss debt collection register. If an ad or a loan broker offers to get you a loan in spite of a negative ZEK entry or debt collection, then it is most likely a scam.

Red flag 3: Get a loan even if you are overindebted

Swiss lenders are not allowed to give you a loan if it could result in your becoming overindebted. Apart from refinancing, reputable lenders generally do not advertise loans specifically for people who already have debts.

Red flag 4: Get a loan even if you are unemployed

Having permanent employment in Switzerland is a general requirement for getting a personal loan. Ignore ads and brokers that claim you can get a loan without being employed.

Red flag 5: You have to pay a deposit or separate fees

The Swiss Consumer Credit Act requires licensed Swiss lenders to include all fees in the loan’s effective annual interest rate. Licensed Swiss lenders will not charge you any separate fees apart from the interest payments.

The same thing applies to licensed Swiss loan brokers. Loan brokers are not allowed to charge you as the customer any fees for the loan itself. They are compensated for their services by the bank or other licensed lender.

If a supposed lender or loan broker charges fees for their services or instructs you to pay a deposit up front before you can get the loan, then the offer is almost certainly a scam.

Red flag 6: Very high interest rates

Swiss personal loans that fall within the scope of the Consumer Credit Act are limited to a maximum legal effective annual interest rate. Currently, the maximum legal interest rate is 11 per cent. Licensed Swiss lenders will never charge you interest rates that are higher than that.

Red flag 7: Very low interest rates

Some loan scammers lure their victims by advertising loans with very low annual interest rates (under 2.5 percent, for example). This scam can also appeal to people with good income and creditworthiness who are looking for the cheapest possible financing.

You can find the lowest possible interest rates for personal loans from licensed Swiss lenders in the moneyland.ch personal loan comparison. Lower interest rates are generally only available for collateralized loans, such as life insurance policy loans and Lombard loans.

Red flag 8: You are not given a waiting period

For loans that fall under the Swiss Consumer Credit Act, lenders must wait 14 days from the time your application is accepted before they give you the money. During that waiting period, you can cancel the loan application completely free of charge.

If a purported lender offers to lend you the money instantly, or within less than 14 days, you should be suspicious. You should also be wary if they do not allow you to cancel a loan during the 14-day waiting period.

Red flag 9: The service provider is not Swiss

Reputable foreign lenders do not offer unsecured private loans to residents of foreign jurisdictions. The reason for this is that it is difficult for them to pursue unpaid debts in a foreign country. Check whether the company offering the loan is based in Switzerland. You can find and compare all licensed Swiss personal loan providers in the personal loan comparison on moneyland.ch.

Red flag 10: The offer is for a cryptocurrency loan

Loans denominated in bitcoin or other cryptocurrencies are not automatically scams. Some Swiss cryptocurrency service providers offer Lombard loans in Swiss francs that are collateralized by cryptocurrencies.

However, many loan scams make use of cryptocurrencies for their fraudulent schemes. That is because cryptocurrency transactions are difficult to trace, so it is hard to recover deposits or fees that you pay up front in hopes of getting a loan. Currently, no reputable Swiss lenders offer unsecured personal loans denominated in bitcoin or other cryptocurrencies.

More on this topic:
Compare Swiss personal loans now
Personal loans: Common mistakes
Online loans in Switzerland explained
Personal loans in Switzerland: Tips for getting the right loan