Loan in foreign currency? Beware of the exchange rate!

Loan in foreign currency? Beware of the exchange rate!
The Bank of Albania says that individual loans issued in euro or USD continue to remain threatened by the fluctuations of the currency exchange rates, obliging borrowers to pay higher installments in the future

“I know that my loan installment is fixed. 20 thousand lek a month and the monthly installment is always falling. Whatever happens, the loan remains in lek”. This is Elona, 30 years of age from the capital, answering her best friend who tells her that the monthly installments on her loan in euros have become more expensive as the euro strengthens.

This is a concern for many individuals in Albania, who have borrowed in euro and it is also confirmed by the Bank of Albania in its latest report saying that “loans in foreign currency are not protected against the fluctuations of the currency exchange rates”. Around half of the loans issued in Euro or USD face such threat.  “In June 2017, loans in foreign currency threatened by fluctuations in the currency exchange rate accounted for 45% of total loans in foreign currency or 26% of total loans”, experts of the Bank of Albania say.

“The level of threat for loans in foreign currency, mainly issued to businesses, remains high”, the Bank of Albania assesses. According to this bank, “in case of fluctuations in the currency exchange rate, loans in foreign currency are the first ones to be affected when the incomes of the borrower’s incomes are in lek”. This strengthens the idea that people and businesses should borrow in the same currency as their revenues.

 

 

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