Lending money to someone is nothing unusual in everyday life. Whether in a private setting, within the family, or between business partners, loans are often granted quickly and informally. However, this very simplicity entails legal and practical risks. Even though Swiss law contains clear provisions on loans (Art. 312 et seq. CO), this does not automatically mean that the amount lent will ultimately be repaid.
The law does not protect the lender from a default. However, it provides instruments to enforce an existing claim, provided that the essential points were clearly agreed and documented from the outset.
What is a loan
Under Swiss law, a loan is a contract by which the lender undertakes to make a certain sum of money available to the borrower, while the borrower undertakes to repay it. It should be noted that the law does not prescribe any specific formal requirements. Whereas, a loan can be concluded in writing, orally, or even by implied conduct.
This is precisely where a major problem lies: what is legally valid is not necessarily provable. If disputes arise later, the question often arises whether a loan existed at all or whether it was, for example, a gift. It may also be unclear which repayment terms or interest rates were agreed. For this reason, it is recommended, even in private settings, to conclude a written agreement in which at least the key points are recorded.
Assessment of creditworthiness
Before granting a loan, the lender should form an opinion about the borrower’s financial situation. The law places this risk entirely on the lending party. Anyone who lends money must assess whether repayment is realistic.
This can be done by requesting an extract from the debt enforcement register or by obtaining a credit report from specialized providers (e.g. Moneyhouse). A simple assessment of income and assets can also be useful. While such prior checks do not provide a guarantee, they reduce the risk. In some cases, it may also be useful to obtain information from acquaintances. It is not necessary to ask directly about creditworthiness; you can simply ask whether the person is considered trustworthy.
Interest is only owed if agreed
A frequently underestimated point concerns interest. In private transactions, the principle applies that a loan only bears interest if this has been expressly agreed. Without such an agreement, there is generally no entitlement to interest.
In commercial transactions, this may be assessed differently; in such cases, interest may be owed even without an explicit agreement. If no provision is made regarding the interest rate, the law refers to the customary market rate at the time of payout.
For this reason, it is advisable to clearly define in the contract whether interest is owed and at what rate. Unclear or missing provisions often lead to disputes. It is also important to ensure that interest rates do not reach a level that could be considered abusive or extortionate. As a practical benchmark in Switzerland, the maximum permissible interest rate for consumer credit under the Consumer Credit Act (CCA) can be used. This is adjusted periodically and is currently set at a maximum of 10% per year for cash loans.
Repayment and maturity
Another key point is repayment. If neither a fixed repayment date nor a notice period is agreed in the contract, the statutory fallback rule applies: in this case, the loan becomes due six weeks after the first request for repayment. This means that the lender can request repayment at any time.
This rule is often unsatisfactory for both parties. It provides neither planning certainty nor clarity regarding the duration of the financing. In practice, it is therefore advisable to agree either on a fixed term or at least on a notice period. This creates transparency and significantly reduces the potential for conflict.
Enforcement of claims and acknowledgment of debt
If payment is not made, the question of enforcement arises. Swiss debt enforcement and bankruptcy law provides effective instruments for this purpose. However, it is crucial that the claim can be clearly proven.
A written loan agreement can play a central role here. If properly drafted, it can serve as an acknowledgment of debt within the meaning of the Debt Enforcement and Bankruptcy Act (DEBA) and thus be used as a basis for provisional approval in enforcement proceedings. This makes enforcement significantly easier, as the lender no longer has to prove the entire claim in ordinary proceedings.
Securing the loan
If additional collateralization is desired, the loan can be secured. In private practice, this is often done through a so-called pledge. In this case, the borrower transfers a movable asset to the lender as security. It is essential that the asset is actually transferred; without transfer of possession, no valid pledge is created.
For larger amounts, especially in connection with real estate, other forms of security may be considered. A mortgage requires mandatory registration in the land register and is not valid without it.
Importance of documentation
An aspect that is often underestimated is proper documentation. Even a well-drafted contract is not sufficient if the actual payout or repayment cannot be proven. Hence, it is advisable to document all financial transactions clearly. Bank transfers offer clear advantages, as they are automatically recorded. In the case of cash payments, corresponding receipts should be issued.
The transfer of collateral should also be confirmed in writing. Careful documentation is often decisive in the event of a dispute and can make the difference between an enforceable claim and one that is practically worthless.
Special loans: consumer credit and mortgage-backed loans
Not every loan is subject to the same rules. If a loan is granted commercially to a private individual, the Consumer Credit Act may apply. Small loans from banks, for example, qualify as consumer credit. The Consumer Credit Act imposes strict requirements, particularly regarding creditworthiness assessments and contract design.
Loans secured by real estate are subject to specific rules of property law. The security only arises upon registration in the land register, which requires careful legal implementation.
Conclusion
A loan can be established easily under Swiss law, but it is frequently a source of disputes. The lack of formal requirements repeatedly leads to disagreements about the existence or amount of a loan. Written documentation is therefore essential to avoid later conflicts. Anyone lending money should be aware that repayment ultimately depends on the borrower’s ability and willingness to pay.
At the same time, the law provides effective instruments to enforce a claim. However, this requires that the essential points, particularly the loan amount, interest, repayment terms, and any securities, are properly documented. Those who follow these principles lay the foundation for a loan that is not only based on trust but is also legally enforceable.
Template loan agreement
Nomadlaw offers a template for a loan agreement in German and Thai. This allows you to structure a loan securely under Swiss law. The template costs CHF 60.00 excl. VAT.
