Loan: beware of low interest rates
When applying for a personal loan or when choosing between a loan or lease, most people make their decision based on the lowest interest rates on the market.
But beware of smoke and mirrors!
By yielding to these very low rates, you should expect a few surprises, such as administrative costs, insurance coverage or even unaccounted VAT.
Personal loan: surprises hidden behind low interest rates
Interest rates for consumer credit in Switzerland vary from one bank to the next: they fluctuate between 5.9% and 14.5%!
Migros bank: 5.9% and a few surprises along the way!
The Migros bank (in french) has the lowest interest rate on the market at just 5.9%.
However, if you apply for a personal loan at a branch, your interest rate immediately rises by 2%!
Furthermore, you only benefit from death insurance. Accident, sickness and unemployment insurance is not included, unlike with most other banks.
Therefore, in order to benefit from this attractive rate, you have to complete the entire application procedure online and by post, which will require you to provide a certificate from the court proceedings registry (travel expenses + costs) and certify all documents transmitted by post (wage slips, etc.), which will result in additional costs.
The Banque Cantonale de Genève (BCGE): 7.5% with no added surprises!
The BCGE implements a rate of 7.5%, but this includes all insurance policies (death, unemployment, sickness and accident cover) as well as all administrative costs.
Leasing rates: in the end, more expensive than a loan
The rates implemented for leases, ranging from 2.9% to 6%, are generally lower than those of a loan. However, some hidden expenses and disadvantages are not taken into consideration:
- Because leases are subject to VAT, the monthly repayment will increase by 8%! Moreover, as VAT can be modified at any moment, the monthly repayment amount for the lease cannot be guaranteed throughout the term of the contract.
- No death, unemployment, accident or sickness cover
- No possibility of deducting interest from your taxable income as is the case for loans
In the end, when you take into account each of these points, interest rates on loans prove to be more advantageous than those on leases!
To summarise, beware of the hidden facet of low interest rates, as, by not taking into consideration all elements, the calculations are skewed!
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