How to Repay a Loan to the Bank: The Complete Guide

The loan repayment phase is just as crucial as the application phase. Managing repayments correctly and on time not only allows you to pay off your debt as scheduled, but also affects your future solvency, a key factor that Swiss banks evaluate when you apply for new financing.

If you have already obtained a loan, for example with an operator like Bob.Credit, it is essential to understand the different repayment methods and the best strategies to manage them.

1. Amortization and Installments: The Basics of Repayment

The repayment of a loan occurs through an amortization plan, which sets the number of installments and their amount. In Switzerland, the most common form is the fixed-rate installment loan, where you pay a constant amount each month. This installment is composed of two parts:

• Principal portion: The part of the installment that serves to repay the capital that was lent to you.

• Interest portion: The part that represents the cost of the loan, calculated on the remaining principal.

At the beginning of the amortization plan, the interest portion is higher, while the principal portion is lower. Over time, the remaining principal decreases, and consequently, the interest portion decreases while the principal portion increases. This process ensures that the debt is completely paid off at the end of the established period.

It is essential not to skip installments and to pay on time. Delays can lead to penalties and, in the worst-case scenario, to negative entries with the Central Office for Credit Information (ZEK), which will make it almost impossible to obtain new loans, mortgages, or financing in the future. If you have any doubts about the requirements for a loan, you can consult our detailed guide on loan requirements in Switzerland.

2. Repayment Methods and Flexibility

Most financial institutions offer various options for loan repayment. The most common method is the monthly direct debit from your current account, which ensures timely payment. Other options include:

• Bank transfer: You can set up a periodic transfer from your account to pay the installment.

• Payment via e-banking: Most digital and traditional banks offer the possibility to pay installments directly from their online platform.

In addition to standard payments, it is important to understand the flexibility of your contract. Some loans allow for extraordinary amortization, which is the possibility of repaying extra amounts or settling the debt early. This option is particularly useful if you have received extra income (such as a 13th-month salary or a bonus) and want to reduce the total cost of the loan, as interest is calculated on the remaining principal.

However, before proceeding with an early repayment, always check if your contract includes any penalties. Some institutions may apply a fee for the early closure of the debt.

3. What Happens If You Can't Pay the Installments?

If you find yourself in a situation of financial difficulty and cannot pay one or more installments, the worst thing you can do is to ignore the problem. Acting promptly is essential.

• Contact the bank immediately: Talk to your advisor or customer service. Many institutions are willing to find a solution, such as a temporary payment suspension or a renegotiation of the amortization plan, provided you show a willingness to cooperate.

• Do not get into more debt: Do not seek another loan to cover the installments of your current loan. This would lead to a vicious cycle that would worsen your situation. Instead, try to reduce your expenses and, if necessary, seek debt counseling services.

In any case, proper repayment management is a sign of financial responsibility. A well-followed amortization plan allows you to maintain a positive credit history and have access to future financing opportunities, whether you want to buy a car, finance a project, or apply for a mortgage.

To ensure you have chosen the best loan for you from the beginning, with clear rates and repayment terms, we recommend using an online comparison tool.

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