Repay your car loan early: What options do borrowers have?

You would like to Car loan and are wondering whether this is possible? The answer is yes - you can repay or cancel your loan early. Early repayment of your loan is permitted by law at any time.

Whether you have a car loan, personal loan or several loans - you can repay your loan early at any time and thus cancel your current contract. Even if you have found a better annual interest rate or more favourable loan with another bank in the meantime, you can redeem your current loan.

Repayment loan, unscheduled repayment or debt rescheduling

Loans are common in Switzerland: in 2020, the volume of all loans in Switzerland - both private households and companies - totalled CHF 1259.1 billion.

Before we look at the topic of "Replacing a car loan early", it is first necessary to clarify a few terms:

Repayment and amortisation

The amortisation of a loan means nothing other than the repayment of loan debts. In this context, banks also use the terms "amortisation" or "amortisation". Both terms come from the French word "amortir" and mean "to amortise".

Loans are amortised or repaid via instalments or special payments (= unscheduled repayment) by making a larger instalment. It is particularly worthwhile paying larger instalments at the beginning of the term of your personal loan, as this saves you interest costs.

Amortising loan vs. bullet loan

In Switzerland, amortising loans (= instalment loans) make up the clear majority of personal loans. You repay a repayment loan during a contractually agreed term, e.g. a car loan for 36 months in the amount of CHF (Swiss francs) 36,000. At an interest rate of 4.4 per cent, the monthly instalment for your car would be CHF 1065.40. At the end of the term, you will have repaid the bank CHF (francs) 38,354.40 for your car.

As the name suggests, bullet loans only fall due at the end of the term. Up to this point, only the interest remains owed, not the entire loan amount. You only have to pay this amount on the due date. Mortgages are an example of bullet loans.

Debt rescheduling/repayment of a loan

Rescheduling or early repayment of your loan is possible at any time. And it's worth it: you can save interest by repaying your loan early. You can achieve this in two ways - with a new loan agreement and better interest rate with your existing bank or with a new agreement with new interest rates with a new lender.

The new lender redeems your old loan. The final settlement is made so that the new lender takes over the remaining debt, while you receive a new loan or contract and thus pay new interest on the monthly instalments.

Do I have to expect any consequences if I redeem the loan early?

No, you can redeem or reschedule your loan or car loan - you are not making a mistake: The Consumer Credit Act (KKG) stipulates that a loan may be repaid early at any time and free of charge. This is entirely in line with Art. 3 UWG (= Federal Act against Unfair Competition): "Lending is prohibited if it leads to over-indebtedness."

In addition, if you redeem your loan early, you are entitled to a waiver of the interest on the loan for the unutilised period and to an appropriate reduction in other costs (Art. 17 Para. 2 KKG).

In addition, your credit rating will increase if you have regularly paid back the instalments on your existing loan. This in turn means lower interest rates on your next loan agreement or repayment of the loan.

If you are still unsure, our credit advisors will be happy to help you: +41 44 244 34 00.

How do I redeem my existing car loan and when?

So that you can pay off your old car loan as quickly as possible, please contact us using the contact form or credit application. To do this, click on this link and follow the instructions there.

As soon as we have all the information about you and your old loan (loan amount/residual debt, annual interest rate, bank, term in months or years, etc.), we proceed as follows:

1. We obtain a loan offer from the new bank and at the same time obtain approval for the loan rescheduling. Before we reschedule your old loan agreement, we have several loan offers calculated.
2. If your new contract is active, the new bank will settle the outstanding loan debt with your current bank. This ends the contractual relationship with your old bank. You therefore do not need to cancel your contract, it will run automatically.
3. Together with you, we are pleased that you will save a lot on interest costs with your more favourable loan.

Tip: Are you currently repaying more than one loan? Did you know that you can bundle all your loans into one contract with just one contact person?

Incidentally, this also applies if you are already thinking about a new loan because you need additional furniture, want to renovate your home or buy a larger car. A credit top-up could be the right solution for you.

For additional information on applying for a loan or repayment of your loan, we will be happy to assist you personally: +41 44 244 34 00.