Responsible credit – to prevent over-indebtedness

  • January 21, 2020

As part of prevention and transparency towards credit recipients, the ASBCEF (Swiss Association of Credit Banks and Financing Institutions) wishes to make customers aware of the consequences of their commitment. The goal is also to frame the reasonable limits of a loan, and leave a margin of safety in the event of an unexpected event.

Consequently, since January 2016, the member institutions of the ASBCEF must systematically deliver an information note to consumers of credits, which describes the context of the contract and the possible solutions.

What characterizes the granting of responsible credits

Switzerland is one of the most severe European consumer credit countries. One of the objectives of the Federal Consumer Credit Act (LCC) and self-regulation agreements is to protect the customer from the risk of over-indebtedness. Thus, the member institutes of ASBCEF carry out an in-depth study of each client, as well as a scrupulous control of their profile, in order to propose tailor-made solutions and appropriate advice, since each situation is unique.

Analyze case-by-case practices

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The main element for a credit recipient is the eligibility of the credit. Indeed, the borrowed amount must necessarily be within the customer’s financial capacity. For this purpose, it is necessary to know the customer’s overall situation, that is his income but also his expenses. Thus, the member institutions of the ASBCEF systematically analyze the global financial situation of the credit recipient and a personalized risk profile is created for each customer so that the request can be accurately assessed.

The lender can therefore determine the amount of the eligible loan starting from the individual budget, taking into account the monthly installments that will have to be repaid but also providing a sufficient margin to leave the beneficiary of the credit a certain financial flexibility that allows him to make faced with the unexpected. In other words, it is a question of leaving the client with a sufficient safety margin to cope with any non-calculated risks , and avoiding being strangled by too tight a credit due to an unexpected event.


To leave a financial margin to cope with the reversals of luck

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The customer must keep in mind that many unforeseen events may occur in the credit period subscribed. For example, the customer can:

Lose the job suffer a major accident , or a serious illness or an expensive divorce. These numerous risks will have direct or indirect consequences on the credit taken out, since they can generate significant changes in income or expenses. It is therefore very important to consider these risks before taking out the credit , and to foresee a financial margin that will allow to face the possible consequences. In this case, consumption can minimize these risks thanks to very targeted preventive measures.

General principles for granting credit responsibly

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In fact, in the event of a serious blow, it is strongly recommended to quickly contact the financial institution concerned, and if necessary, the institution will be able to propose adequate solutions for the repayment of the credit subscribed, in order to avoid an aggravation of the situation customer financial.

In order to prevent the risks mentioned, the lender may propose, for example, the conclusion of an additional guarantee to cover the monthly installments, in order to help the credit recipient to protect himself from a payment default. This precaution thus avoids situations of over-indebtedness or even personal bankruptcy. It is a reasonable measure that follows the saying: prevention is better than cure.

In any case, the customer is strongly recommended to seek advice from the lender to draw up an inventory of applicable solutions and measures, based on his personal situation.


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