Lending money between private individuals in Switzerland: the rules

Lending money to a friend or family member is common, but it is also a frequent source of disputes. Under Swiss law, this kind of arrangement is a loan for consumption within the meaning of art. 312 ff. of the Swiss Code of Obligations (CO): the lender transfers a sum of money to the borrower, who undertakes to repay an equivalent sum. The rules are simple, but a few precautions avoid many misunderstandings.

The law does not require any particular form: a loan agreed orally is valid. In the event of a disagreement, however, it is up to the lender to prove that it was a loan and not a gift, as well as the amount and the terms agreed. A written contract signed by both parties is therefore strongly recommended. It should state the identity of the parties, the amount, the date of payment, any interest, the repayment terms and the due date. Pay the money by bank transfer rather than in cash: the bank statement is additional proof that the funds were handed over.

Between private individuals, interest is only owed if it has been agreed (art. 313 para. 1 CO). If you want to be paid interest, set a clear rate in the contract. An interest-free loan is perfectly lawful. However, if repayment is late, the borrower owes default interest of 5% per year in any case, from the moment they are in default (art. 104 CO). The Consumer Credit Act is aimed at professional lenders and, in principle, does not apply to a one-off loan between people close to each other.

The contract should set a repayment date or an instalment plan. If no due date and no notice period have been agreed, the borrower must repay within six weeks of the lender's first request (art. 318 CO). To start this period in a way that cannot be disputed, send your request by registered letter. If the instalments are not paid on time, a written formal notice is the first step before starting debt enforcement.

The acknowledgement of debt is a valuable tool. It is a document, signed by the debtor in their own hand, in which they acknowledge owing a specific amount. In debt enforcement, if the borrower lodges an objection to the payment order, this document allows the creditor to apply for provisional removal of the objection (mainlevée provisoire, art. 82 LP) in a fast procedure, without going through ordinary court proceedings. It is then up to the debtor to show credibly that they no longer owe the money. A loan contract signed by the borrower can play the same role if it states a specific amount and the handover of the funds is proven, but a separate acknowledgement of debt makes things simpler, for example when rescheduling repayments.

The claim for repayment becomes time-barred after ten years (art. 127 CO), while periodic interest becomes time-barred after five years (art. 128 CO). An acknowledgement of debt or the payment of an instalment interrupts the limitation period (art. 135 CO), and a new period starts to run.

For tax purposes, the lender declares the claim as part of their assets and the interest received as income. The borrower declares the debt, which they can deduct from their assets, and can deduct the interest paid within the limits set by law. Between parents and children, the line between a loan and a gift matters: a debt that is waived becomes a gift, which may be subject to cantonal gift tax. In inheritance matters, a loan remains a debt to be repaid, whereas a gift may have to be brought back into the estate (art. 626 CC). A clear written document avoids arguments between heirs.

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