Loans in foreign and foreign currency
Loans in foreign and foreign currency are called foreign currency loans. They can be of great benefit to companies as borrowers benefit from potential exchange rate gains. Among other things, a normal currency for a property in euro currency, a foreign currency can be added. The loan is not paid in the usual euro currency, but has a different currency. For example, foreign currency loans can be paid in Swiss francs, Japanese yen or US dollars. Cheap interest rates and maximum flexibility are two of the benefits you can get with a foreign currency loan.
Investing abroad without risk
For example, if you want to buy a house or apartment abroad, a foreign currency loan is also available to you. This is not so rare in Germany, because many buy a holiday home in Switzerland or in the United States of America. Then it makes sense to take out a loan in the appropriate currency. As with ordinary loans, these foreign currency loans can be stocked with low interest rates and individual repayment options. Furthermore, a quick repayment is possible and also an additional hedge against various currency fluctuations is given.
Risks of foreign currency loans
In addition to the many advantages of a foreign currency loan, of course, the risks that such a loan brings with it. The exchange rate or the borrowing rate of the respective currency can not only develop favorably, but also fluctuate adversely. If you do not have any income in your chosen currency, you might get disadvantages due to price fluctuations. After all, the loan is admitted in a foreign currency, but repaid with the usual euro currency. If the respective exchange rate develops badly, then the borrower pays accordingly.
In addition to the great opportunities for a favorable borrowing so also various risks. If you want to take out such a loan, you must be at least somewhat familiar with interest and exchange rates and keep an eye on them. At least as long as the term of the loan continues. Potential burdens can be more easily absorbed by savings plans or various buffer amounts.