Fremdwährungskredit

Fremdwährungskredit, also known as a foreign currency loan, is a loan denominated in a currency other than the borrower's home currency. Borrowers typically opt for these loans when they anticipate favorable exchange rate movements or when interest rates in the foreign currency are significantly lower than in their domestic currency. The primary risk associated with a Fremdwährungskredit is exchange rate fluctuation. If the foreign currency depreciates against the borrower's home currency, the cost of repaying the loan in the borrower's domestic currency will increase. Conversely, if the foreign currency appreciates, the repayment cost decreases.

These loans are often taken out by individuals or businesses engaged in international trade or investment. For example, a German company importing goods from the United States might take out a loan in US dollars to avoid the risk of exchange rate changes impacting the cost of its imports. Similarly, an individual purchasing property abroad might secure a mortgage in the local currency. The decision to take on a Fremdwährungskredit requires careful consideration of market conditions, interest rate differentials, and a thorough understanding of the potential currency risks involved. Financial institutions offering such loans usually provide extensive risk disclosures to borrowers.