Exchanging currencies to borrow is a complex task, especially in countries with unstable economies. One option that can be used is a foreign currency loan. With their low-interest rates and ease of securing collateral, many people consider this option to finance their travel abroad or make small business investments abroad.
This article covers several tips for taking out a loan in Hungary and discusses how the legal practices differ from other countries. It provides detailed information about what these loans entail and how to apply for one if interested.
Although the interest rates on these loans are attractive, there can be hidden costs and complications when taking one out. Foreign currency loans generally contain several clauses designed to protect the firm issuing the loan rather than to protect you. This can make it very difficult for an applicant, who usually needs to gain adequate knowledge of foreign exchange laws or practices.
The lender is not required to act in good faith when dealing with borrowers in a foreign currency loan. You have different legal rights than you would have if you took out a regular loan from a bank in your home country.
However, as this article states, “this does not mean that a borrower cannot be treated fairly by their creditor. If your loan is handled professionally and your creditor operates with integrity, there is nothing to fear.”
As mentioned above, not all countries view foreign currency loans the same way as regular loans. This can make it challenging to get a legal resolution if there is an issue with the borrower.
The lender can try to use the court system in their country, and if you are still looking for a lawyer who speaks the local language, you could be included in the loop. The good news is that while most lenders will want to use courts in their home country, they are not required to do so.
In addition to the different practices on foreign currency loans, there are also some differences in the laws governing them. For example, you will be asked about your business before getting a loan. If you are a sole proprietor, you do not need to declare your business income with the government. This can make it difficult for borrowers to declare their salary or income.
There is also an essential difference between bank loans in Hungary and these foreign currency loans. Bank loans are generally easier to secure and have lower interest rates than those issued in foreign currencies. However, they typically require the borrower to take out a Hungarian loan first and then change the currency later.
Foreign currency loans are available from banks and other firms and are better for those who know how to negotiate. The fact that these firms will often ask for collateral from the borrower makes it easy to obtain one if they know how to deal with the creditors.