Credit in progress and unemployment, how to protect yourself?
Earning disabilities, accidents, illness and involuntary unemployment are not uncommon events in an individual’s life.
When you find yourself unemployed, you easily lose between 20% and 30% of your last salary, which can lead to a gap in income and thus upset your monthly budget and your maintenance of living standards, all the more if you have a charge such as a private loan.
What to do in this kind of situation?
When we take out a loan, you are not immune to a possible loss of earnings which may prevent you from honoring the planned monthly payments.
Some banks anticipate these unexpected events by offering unemployment insurance (PPI) directly included in your credit agreement. PPI allows monthly payments to be insured in the event of a claim, so you don’t need to worry about it.
This insurance can be valid for a maximum of twice 12 months during the expected duration of the contract, however, it cannot be used 24 months in a row.
Can I make a loan while unemployed?
Banks and financing organizations in Switzerland cannot offer private credit when you are unemployed.
Indeed, banks are based on a budget calculation based on the amount of salary or income from an annuity. They need some certainty regarding the creditworthiness of the client and the repayment of monthly payments, something that unemployment cannot provide.
Although, even if you are unemployed, you continue to receive money on a regular and more or less stable basis, your financial situation is not enough for the banks and it is strictly prohibited for the banks to grant a loan to the unemployed, apart from the annuitants (AVS / AI). In fact, unemployment is considered as insurance, and it is not possible in Switzerland to obtain a credit by being in insurance, whether it is maternity, accident or unemployment insurance.
What if I become unemployed while on credit?
If you find yourself unemployed during the repayment of your credit and you have no unemployment insurance, the situation becomes more complicated. At the time of your leave, whatever it is, it is indeed too late to take out insurance which would allow you to maintain your budget and ensure your monthly payment.
In these cases, we advise you to contact the person concerned, who will be able to offer you an appropriate solution concerning the reimbursement before the situation worsens and you accumulate the unpaid monthly payments.
It is however good to know that the banks calculate the budget in a responsible way, always leaving a certain margin of guarantee in order to avoid that the customer does not go into debt in the event of unemployment.
How do I secure my credit?
When you become unemployed or incapacitated, it is too late to take out insurance. There are also certain deadlines.
For unemployment insurance, there is a waiting period of 3 months after signing the contract.
Following this and in the event of incapacity to earn, you will immediately receive the amount of the service for which you have signed.
In the event of involuntary unemployment, a 3-month waiting period will follow the 3-month waiting period. This is why it is important to go about it in advance in order to anticipate the unexpected as well as possible.