Missed a loan payment

If you have missed a loan payment, pay it as soon as you can, and talk to your lender before the next one is due. If your contract sets a date for each payment, you are in default from the end of that day, even without a reminder (OR Art. 102). Any late interest may not be higher than the rate in your contract (KKG Art. 18). Once unpaid instalments reach 10 % of the net amount of the credit, the lender may withdraw from the contract, and it must report the arrears to the IKO, the information office for consumer credit (KKG Art. 18 and 25). A debt that stays unpaid can lead to a Betreibung (debt collection). If more than this one payment is hard to make, get free advice early: the hotline of the debt advice services, 0800 708 708, answers Monday to Thursday from 10:00 to 13:00.

If more than one payment is hard

One late payment after an unexpected bill is one thing. If the next payment is in doubt too, or other bills are late, get advice now, before the debts grow.

Budgetberatung Schweiz, the umbrella organisation of budget advice services, puts it this way: if you see that paying off your debts would take you longer than three months, a debt advice service is the right place to go. With your consent, a debt restructuring service named by your canton can also see the credits recorded about you at the IKO (KKG Art. 24).

Our guide debt help in Switzerland explains every way out of debt, from a payment plan to a settlement with all your creditors.

What to do now

1. Find out exactly what is overdue: the amount, the due date, and any reminder that has arrived. Open every letter from the lender and keep it.
2. Pay what is overdue as soon as you can, with the reference the lender gives you.
3. If you can’t pay, contact the lender before the next due date. Say what you can pay and from when, and ask what it can offer. Budgetberatung Schweiz notes that a solution can often be found with a creditor, such as payment in instalments or more time. Get any agreement in writing.
4. Check whether you are insured. Some loans come with insurance that pays the instalments if you can’t work, fall ill, become disabled or lose your job. Caritas debt advice notes that the cover of such insurance is in general limited in time, in amount or by other conditions. If you have one, read its terms and report your case.
5. Go through your budget. See what else is due this month, such as rent, health insurance and taxes, and where you can cut. Our guide making a budget shows how.
6. Don’t borrow to pay the instalment. Paying old debts with new ones can turn into a vicious circle, Budgetberatung Schweiz warns. From its experience, Caritas debt advice says a credit should never be taken out to bridge a financial shortfall.

What happens after a missed payment

For a personal loan under the Consumer Credit Act (Konsumkreditgesetz, KKG), which covers credits from CHF 500 to CHF 80’000 (KKG Art. 7), the steps are these:

The Act’s rules may not be changed to your disadvantage (KKG Art. 37). The Act does not say what you owe once the lender has withdrawn from the contract. Look in your contract and its general terms. If a lender ends your contract and asks for the rest of the loan, get advice before you agree to anything or sign a new arrangement.

When the 10 % is reached

The threshold counts the unpaid instalments against the net amount of the credit, which your contract must state (KKG Art. 9). An example with made-up figures: for a loan with a net amount of CHF 10’000, 10 % is CHF 1’000. With a monthly payment of CHF 300, three unpaid payments come to CHF 900 and four to CHF 1’200. So in this example, the lender may withdraw, and must report to the IKO, once a fourth payment is unpaid. Every payment you make in the meantime lowers the arrears.

Leasing and cards

• Leasing. The leasing company may withdraw from the contract once the unpaid rates add up to more than three monthly rates (KKG Art. 18). It must report to the IKO when three rates are unpaid (KKG Art. 26).
• Cards and overdrafts with a credit option. The cap on late interest, and the lender’s right to withdraw once arrears reach 10 %, apply to them too (KKG Art. 8 and 18). Once you use the credit option three times in a row, the amount owed is reported to the IKO, unless it is under CHF 3’000 (KKG Art. 27).

What it means for your credit records

• IKO. When the lender reports arrears, the IKO records the report and its date with the contract (VKKG annex). Every lender that grants a consumer credit must ask the IKO about you first and count the commitments recorded there (KKG Art. 28), and the report is part of what it sees. Lenders may use the IKO’s data only for that check (VKKG Art. 3). The IKO stores running contracts only. Once a lender deregisters a contract, the IKO deletes it at the latest 14 days later.
• ZEK. If your lender is a member of the ZEK, the central office for credit information, it reports changes to your contract and its rating, positive and negative. An ended contract stays there for 3 years from the date of its rating, or 5 years if it was rated as a partial or total loss or with legal uncertainties.
• The debt collection register. An extract shows the Betreibungen opened against you in the past 5 years. An entry is deleted automatically 5 years after the proceedings end. Before then, a creditor you have paid or reached an agreement with can withdraw the Betreibung and have the entry removed (ch.ch).

Both the IKO and the ZEK say that an entry is not negative as long as you meet your obligations. Paying on time again counts in your favour. You can order your own extract from each office, free of charge, by post: see ZEK and IKO explained. For your debt collection record, see ordering a debt collection extract.

If a Betreibung arrives

A creditor usually sends a reminder first, but the law does not require it (ch.ch). The Betreibung then runs in steps:

1. The Zahlungsbefehl (summons for payment). The post or the debt collection office hands it to you or to an adult in your household (ch.ch).
2. If you owe the money, you have 20 days to pay (SchKG Art. 69). If that is hard, get advice and talk to the creditor: an agreement to pay in instalments is possible (ch.ch).
3. If you dispute it, file a Rechtsvorschlag (objection), orally or in writing: when the summons is handed to you, or at the debt collection office within 10 days (SchKG Art. 74). You don’t have to give reasons (SchKG Art. 75). If you dispute only part of the amount, state which part, or the whole claim counts as disputed (SchKG Art. 74). The creditor must then ask a court to set the objection aside (ch.ch). Caritas points out that an objection can lead to costs if it is later set aside.
4. Pfändung (seizure). Without an objection, the creditor can ask for the Betreibung to continue 20 days after the summons was served, at the earliest (SchKG Art. 88). Your income can then be seized as far as you and your family don’t absolutely need it, for one year at most (SchKG Art. 93). The office can tell your employer to pay the seizable part of your wage to it directly (ch.ch).
5. Verlustschein (certificate of loss). If the seizure does not cover the debt, the creditor receives a certificate for the rest, and you receive a copy (SchKG Art. 149). You owe no interest on that amount (SchKG Art. 149). The claim becomes time-barred 20 years after the certificate is issued (SchKG Art. 149a).

Don’t let the 10 days pass without deciding. Our guide debt help in Switzerland explains each step, and what a seizure leaves you to live on.

If the lender should not have lent to you

Before it lends, a lender must check that you can afford the credit (KKG Art. 27a), with the aim of avoiding over-indebtedness (KKG Art. 22). If it seriously breaks the rules of that check, it loses the whole amount it lent, with interest and costs, and you can claim back what you have already paid. For a minor breach, it loses the interest and costs (KKG Art. 32).

If you think this applies to you, Caritas advises asking the lender in writing for the complete credit file: your application, your salary statements and the IKO extracts it obtained. Then have a lawyer check whether the budget was worked out as the law requires. If a Betreibung for the loan arrives while you have doubts, Caritas advises filing your objection at once, so the deadline is not lost.

Be careful with offers of quick help

Never pay a fee in advance to someone who promises a loan, or promises to clear your debts. The debt advice services listed on schulden.ch and dettes.ch are non-profit. See spotting loan scams.

If your loan is with Swizeo

If a payment looks hard to make, tell us early, before the due date if you can.

Next step

Call your lender before the next payment is due, and get any agreement in writing. If other bills are late too, call the free hotline 0800 708 708, Monday to Thursday from 10:00 to 13:00, or find the debt advice office for your region on schulden.ch or dettes.ch.