Credit debts are financial obligations resulting from taking out loans that must be repaid, including interest and any fees. Credit debt comes in various forms, such as consumer credit, credit cards, mortgages, or business loans.

Reliable debt advice centers, such as Schuldenberatung Schweiz, Budgetberatung Schweiz, Caritas Switzerland, and Pro Senectute, offer help with credit debt.

There are various ways out of over-indebtedness, from personal budgeting to insolvency proceedings. Credit debts have not only financial but also far-reaching personal and legal consequences, ranging from emotional stress to negative entries in the debt collection register.

Preventive measures against over-indebtedness include careful planning and management of one’s own finances, raising awareness of the risks of borrowing, credit checks, and the use of insurance.

What is the definition of credit debt?

Credit debt is a liability that arises when a person or company borrows money from a lender, typically a bank or other financial institution. Credit debt must be repaid within an agreed time frame, usually with interest and sometimes with other fees.

Full repayment of credit debt has a set due date, either in one lump sum at the end of the term or through regular installments. Credit debt can occur through various forms of credit, including the following.

Consumer credit: Consumer credits are intended for personal expenses such as the purchase of cars, household appliances, or vacations.
Credit cards: Credit cards offer the ability to spend money up to a certain limit, with repayments made monthly and interest charged on the outstanding balance.
Mortgages: Mortgages are special long-term loans for the purchase of real estate, with repayments spread over years.
Business loans: Business loans are used to finance business investments or working capital and come in various forms, such as overdrafts or term loans.

Credit debt differs from other types of liabilities in terms of the underlying formal agreement and the interest incurred. It is an essential part of the financial system and provides access to important resources, but it also carries the risk of financial overload if not managed carefully.

What debt advice centers are there?

There are numerous debt advice centers in Switzerland. The largest and most trustworthy are the following.

Schuldenberatung Schweiz (Debt counseling Switzerland)
Budgetberatung Schweiz (Budget counseling Switzerland)
Caritas Switzerland
Pro Senectute

1. Schuldenberatung Schweiz (Debt counseling Switzerland)

The organization “Schuldenberatung Schweiz” is the umbrella organization of non-profit specialist debt counseling services in Switzerland. Its main objective is to represent the interests of private individuals in the areas of debt, over-indebtedness, and debt restructuring, as well as to work with the public. The members work according to common guidelines, but Schuldenberatung Schweiz itself does not offer individual counseling. Instead, they recommend contacting a debt advice center in the respective canton.

They provide the addresses and contact information of debt advice centers in the cantons of Aargau, Appenzell, Basel-Landschaft, Basel-Stadt, Bern, Fribourg, Geneva (Genève), Glarus, Graubünden, Jura, Lucerne, Nidwalden, Neuchâtel, Schaffhausen, Schwyz, Solothurn, St. Gallen, Thurgau, Ticino, Uri, Vaud, Valais, Zug and Zurich.

“Schuldenberatung Schweiz” is thus actively committed to overcoming debt problems in Switzerland by providing information and highlighting the importance of debt prevention and debt management.

2. Budgetberatung Schweiz (Budget counseling Switzerland)

“Budgetberatung Schweiz” is a non-profit organization that has specialized for over 60 years as an independent contact point for questions relating to the budget of private individuals. Its aim is to provide information, advice, and further training for people and companies.

Budgetberatung Schweiz enables visitors to its website to create a personal budget, use budget examples for different incomes and life situations, and provide tools and templates for creating a budget. It also offers consultations in which individual budgets are drawn up.

The organization also provides support with questions about other financial issues, such as pensions, pocket money, provisions, and taxes.

3. Caritas Switzerland

The organization “Caritas Switzerland” is a major player in the social sector that has been committed to preventing, combating and alleviating poverty since 1901. Caritas Switzerland works both nationally and internationally. The organization implements social projects locally in Switzerland and worldwide to support people in need.

Caritas Switzerland makes an important contribution to improving the lives of many people through various services such as debt counseling, care and support at home, and the Caritas Mountain Mission. In Switzerland, Caritas consists of 16 regional, independent organizations that implement local social projects. Caritas Switzerland combines three services under the term “Caritas Care”: Home care, support for family caregivers, and the pension folder. The aim of these services is to enable older people to live independently in their familiar surroundings and, at the same time, to provide fair remuneration for the care they receive.

Debt counseling services are an important part of the offer to support people in financial difficulties.

4. Pro Senectute

“Pro Senectute” offers substantial support in the area of debt advice for senior citizens in Switzerland. The organization sees itself as an important specialist agency for all issues relating to aging and is aware of the challenges that make independent living difficult in old age.

Pro Senectute offers comprehensive advice in a personal consultation. The consultations take place either at the Pro Senectute offices in Basel, Gelterkinden, Laufen, and Liestal, or directly at the customer’s home.

What are the solutions for over-indebtedness?

There are several ways out of over-indebtedness, depending on how serious the debt is. Below are the various ways out, arranged according to the degree of over-indebtedness.

Personal budgeting
Debt restructuring
Out-of-court settlement
Insolvency proceedings

1. Personal budgeting

Personal budgeting is the first step for people who are faced with excessive debt. It involves drawing up a detailed plan that compares income and expenditure in order to gain an overview of the exact situation. Identifying and reducing unnecessary expenses, prioritizing debt repayment, and finding a long-term financial balance are sufficient in most cases of over-indebtedness to get out sooner or later. Online budget calculators or advice services can help with this.

2. Debt restructuring

Debt restructuring is a method of reducing the financial burden of existing debt. Existing loans are replaced by refinancing at more favorable conditions. The aim is to reduce the monthly installments and thus improve the debtor’s liquidity while naturally extending the term. Debt restructuring is an effective strategy for reducing interest costs and averting the threat of over-indebtedness. An advance of money from relatives or friends is also to be seen as debt restructuring, as the creditor changes either partially or completely.

3. Out-of-court settlement

An out-of-court settlement is an agreement between debtors and creditors to settle part of the debt under newly agreed conditions. The aim is to find a solution that is acceptable to both parties without having to initiate formal insolvency proceedings. An out-of-court settlement is reached, for example, by making a one-off payment of a reduced amount or by restructuring the repayment terms. This offers debtors the chance to reduce their debt burden and make a fresh start while creditors receive at least part of their claims back. Negotiating such an agreement often requires the support of professional debt advice agencies or specialized lawyers.

4. Insolvency proceedings

Insolvency proceedings, also known as bankruptcy proceedings, are a legal measure for people who can no longer repay their debts. In Switzerland, the procedure is known as personal bankruptcy and offers an opportunity to discharge debts, albeit with far-reaching consequences. During the proceedings, the debtor’s available assets are liquidated and divided among the creditors. The aim is to settle some of the debts and give the debtor the opportunity to make a fresh financial start. However, insolvency proceedings have serious disadvantages, such as the loss of assets and a strong negative entry in the credit history, which makes future borrowing more difficult.

What are the consequences of credit debt?

The consequences of credit debt are felt on both a personal and legal level. While the personal consequences mainly relate to mental health, the legal consequences are visible on paper, such as an entry in the debt collection register.

Personal consequences

The consequences of excessive credit debt on a personal level are profound and long-lasting. First of all, they lead to considerable emotional stress and psychological strain. The constant worry about the debt burden often leads to anxiety, depression, and sleep disorders. The financial burden also affects relationships with family and friends, as the worries and pressure associated with the debt burden lead to tension and conflict.

Furthermore, over-indebtedness considerably restricts the quality of life. People suffering from high levels of credit debt have to make drastic cuts to their spending, resulting in them forgoing leisure activities, vacations, and even basic comforts. In extreme cases, over-indebtedness even leads to the loss of a home when mortgages or rent payments can no longer be made. In addition, the frequent need to take on several jobs or work longer hours leads to burnout and health problems.

Legal consequences

The legal consequences of credit debts range from reminder proceedings to foreclosure and insolvency. If debtors fail to meet their credit obligations, creditors take legal action to collect the amounts owed. If the reminders remain unsuccessful, seizures are made, in which assets or parts of income are confiscated to settle the debt.

Insolvency proceedings result in the debtor’s assets being liquidated in order to satisfy the creditors. Although this offers a chance for a fresh start as the debts are subsequently discharged, the negative entry in the credit history remains for years.

Credit debts lead to an entry in the debt collection register if they are not paid, which affects creditworthiness in Switzerland. A debt collection register entry makes it difficult to obtain loans, rent apartments, or even get certain jobs in the future. In some cases, there are also legal restrictions, such as a ban on setting up companies or working in management positions.

How can over-indebtedness be prevented?

Over-indebtedness can be prevented at several levels. In addition to general caution in dealing with your own finances, it is worthwhile to deal with the dangers of taking out a loan in advance. At a legal level, protection against over-indebtedness is provided by the credit check, which is mandatory for loans that fall under the Federal Consumer Credit Act. Insurance also offers preventive protection, although the costs must be taken into account.

What risks do you need to be aware of when taking out a loan?

There are various risks to be aware of when taking out a loan. One of the main problems is overestimating your own financial capacity, which leads to over-indebtedness because the repayment of the loan, including interest and fees, exceeds your financial resources. In addition, personal or economic circumstances are constantly changing, for example, due to unemployment, illness, or a general economic downturn, which affects the ability to repay. The variable interest rate on some types of loans is a further credit risk that leads to an increase in monthly charges if the interest rate rises. There is also a risk that the value of collateral may fall if the debt is secured (e.g., mortgages), leading to a shortfall in the loan.

What role does the credit check play?

Credit checks are a key instrument in preventing over-indebtedness and are required by law in Switzerland. Financial institutions carry out creditworthiness checks to assess the borrower’s ability to repay the loan. The borrower’s income, expenditure, existing debts, past payment history, and economic stability are all taken into account.

A thorough credit check not only protects the credit institution from defaults, but also the borrower from over-indebtedness by ensuring that only loans that are very likely to be repaid are granted.

Does loan insurance make sense?

Loan insurance offers protection against the financial consequences of unforeseeable events that affect the repayment of a loan, such as incapacity to work, illness or death. Such policies cover the loan installments for an agreed period or repay the outstanding loan amount in full.

To minimize the risk of over-indebtedness due to unforeseen circumstances, loan insurance makes sense in some cases, even though it incurs additional costs. It is of course important to ensure that the insurance premiums do not place an excessive burden on the budget and that the conditions offer adequate protection.

What help is available for credit debt in Switzerland?

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