A foreign currency loan is taken outside the eurozone. These loans have the peculiarity that they are “maturing”, ie during the term only the interest is paid and at the end of the term, the entire loan amount is repaid in one. Consumers hope for better conditions than the regular installment loan .
Why foreign currency?
The foreign currency loan is requested outside the Eurozone. Due to changing and fluctuating exchange rates, credit terms may be worse or better. In order to do good business, it is necessary to have a low exchange rate and a high valuation of the foreign currency against your own currency. The level of interest rates in the country in which the foreign currency loan is to be raised, but also the changes in the exchange rates, can make for a very good deal.
Term loans, what is it?
As mentioned earlier, the loans are final, which can also be beneficial. If the interest rates are favorable and only these are repaid in the term, the customer has a huge advantage. He only pays the lower interest charge and can wait until the end of the term to settle the entire loan amount. Usually, the customer then expects a larger sum, with which he can then pay his debts. Always with a view to low interest rates in the financial markets.
Risk of a foreign currency loan
Ultimately, taking a foreign currency loan is a risk. The borrower always has to expect that the loan will be higher than a normal loan. Fluctuations in exchange rates and their increase may drive up interest and loan amounts. Normally, such loan agreements do not have a longer interest rate commitment. You can insure against a premium that the interest level does not go beyond a certain level. In addition, it is expected that additional costs, on the one hand for the newly created account and the fees of the currency exchange come to it. The bank also gets its commission, which ultimately increases the credit again.
Resumé on borrowing in foreign currency
Assuming that the interest rate is almost half of a normal loan, the above fees and commissions are always saved. As prices rise, interest rates decrease and customers only expect benefits. Companies have been using this financing option for a long time, which is why private customers are on the rise. The condition, as with all other financial transactions, should be to obtain sufficient information about these types of financing.