Why is loan affordability assessed over 36 months?
Why is a consumer loan assessed over 36 months even with a longer term? Understand the Swiss KKG rule with figures and exceptions.
Updated on · Budgetcredit
For a cash loan covered by the Swiss Consumer Credit Act, the affordability assessment must assume amortisation within 36 months. This applies even if you choose a longer contractual term. The rule aims to prevent an excessive loan from appearing affordable solely through a very long term and a correspondingly small instalment. KKG, Art. 28 para. 4
The 36 months are an assessment period. They are not automatically the term that must appear in your contract. This distinction explains many seemingly contradictory results from loan calculators.
Two calculations with different purposes
The contractual calculation answers: “What instalment do I pay for this amount, interest rate and term?” A 60-month agreement spreads repayment differently from a 36-month agreement.
The statutory affordability assessment instead answers: “Is the loan affordable under the prescribed standards?” Under Article 28 KKG, repayment must be possible without drawing on the portion of income protected from seizure. The statutory assessment period is used for this purpose. KKG, Art. 28 paras. 2–4
Combining these two calculations into one can lead to incorrect approval. The displayed monthly instalment alone is insufficient to establish affordability.
A concrete example
Suppose you want to borrow CHF 30'000. For this example, we use an effective annual interest rate of 6.9 % and equal monthly instalments without additional costs.
| Perspective | Period | Monthly model instalment |
|---|---|---|
| Desired contract | 60 months | approximately CHF 590 |
| Comparison over the assessment period | 36 months | approximately CHF 922 |
If your private planning leaves CHF 700 each month, the contractual instalment of CHF 590 initially appears affordable. But this does not mean the loan passes the statutory assessment. The model instalment over 36 months is higher. Furthermore, the amount available for assessment must first be determined under the statutory rules.
This example aids understanding. It is neither a complete affordability assessment nor a statement about the amount any particular person will be approved for. Figures are rounded to whole francs; calculations use unrounded values.
Why is “free budget times 36” not enough?
Repayments include interest as well as principal. Simply multiplying a monthly amount by 36 gives the sum of possible payments, not the loan principal that can be financed. Part of those payments covers financing costs.
At an assumed CHF 800 a month, CHF 800 × 36 would total CHF 28'800 in payments. At an effective annual interest rate of 9.95 %, this would correspond to principal of approximately CHF 24'966 in the simplified instalment model. The difference shows why interest must not be ignored.
Even this mathematically correct conversion is not yet a bank assessment. The assumed available amount, existing loans and all legal parameters must also be correct. How an indication is derived is explained in Calculating borrowing capacity.
What part of income remains protected?
The KKG refers to the portion of income protected from seizure and the subsistence minimum guidelines of the canton of residence. It also requires certain items to be included in all cases: rent actually owed, taxes owed according to the withholding tax table and commitments reported to the information office. KKG, Art. 28 paras. 2 and 3
A freely chosen percentage of salary is not an equivalent substitute. Nor is the account balance at month-end sufficient: an annual bill may still be outstanding or an expense may exceptionally have been postponed. The assessment must record your commitments in a verifiable way.
The cantonal rules also explain why a good budget calculator asks for your canton of residence. This is not about labelling a canton generally “credit-friendly”.
What happens to existing loans?
Article 28 paragraph 4 KKG also applies this requirement to earlier consumer loans to the extent that they have not been repaid. Simply deducting the small instalment currently paid on an old contract from your salary may therefore be insufficient. KKG, Art. 28 para. 4
Declare all existing financing. If a new loan is intended to repay an old one, that purpose must be clear. Otherwise, your own rough calculation risks combining the old and new loans incorrectly. Their exact treatment belongs in the assessment of the actual application.
Does the rule apply to every loan in Switzerland?
No. The KKG has a specific scope, exceptions and different rules for individual products. Loans below CHF 500 or above CHF 80'000 are among those excluded. Leasing and credit cards with a credit option have special provisions. This article’s explanation of 36 months concerns the cash loans within scope. KKG, Art. 7, 8, 29 and 30
A loan outside the KKG’s scope is not automatically granted without assessment. The provider may apply its own strict affordability and risk criteria. It would be wrong to suggest a larger amount as a way around insufficient affordability.
What does this mean when choosing a term?
Choose a term that fits your everyday life and compare its total costs. But do not expect an extension to automatically remedy a failed statutory assessment. The requested amount must be affordable in its own right.
If the result does not fit, first check the information and the actual cost of the project. A smaller amount or a later date may make sense. Personal advice can clarify outstanding information, but cannot override the statutory protections.
Frequently asked questions
Must I repay a 60-month loan in full after three years?
Not solely because of this assessment rule. Your ongoing payments follow the validly agreed contract. The statutory assessment period serves a different purpose.
Can additional insurance replace the 36-month assessment?
No. Payment protection covers only the contractually insured events and does not replace sufficient affordability. Its costs must also be affordable.
Does passing the assessment guarantee I will get the loan?
No. The bank also assesses the application against its lending criteria. A positive calculation does not establish a right to a contract.
Ask for an explanation of the contractual instalment and assessment
Budgetcredit helps you put your financing plan into perspective. Further background is available in Creditworthiness and loan affordability.
All examples are non-binding. Credit must not be granted if it would lead to over-indebtedness.
