Loans in francs – what to do next?
Over the past decade, Swiss franc mortgages have been among the hottest banking products. Today they are the bane of those who contracted them. What went and what to do next?
Where did the interest in franc currency loans come from?
At the time of the greatest interest in this product (i.e. around 2008), loans in Swiss francs constituted as much as 80 percent of all loans granted by banks. According to official data, over 700,000 Poles were tempted to do so. What made him attractive?
Advantages and disadvantages of a foreign currency loan
The basic advantage of any foreign currency loan, not only that of Swiss francs, is that its interest rate depends on the type of currency. The interest rate, in turn, directly affects the cost of the loan. The differences in the amount of installments could have been significant compared to those regulated by persons paying back loans in PLN and reached even several dozen percent.
Another advantage of foreign currency loans can, of course, be the exchange rate itself – if we draw it when the zloty is strong and our target currency is weak or falls – we can additionally “earn” (you can read more about earnings on exchange rates in this article on online exchange offices). However, the problem arises when the opposite happens. The zloty flies down, and the currency in which we took the loan increases significantly. And this is what happened with the Swiss franc.
Loan loan – what went wrong?
At the time of the largest boom in loans in this currency, its cost fluctuated around PLN 2-2.5. Now – it is +/- PLN 3.5. Therefore, the costs of such loans soared significantly, which translated into an extremely unfavorable situation for borrowers, as the costs often began to exceed the value of flats. In such situations, even the sale of real estate did not allow to get out of financial trouble – because people who decided to take such a step remained both with a considerable debt and without a flat.
Expensive lesson – frank vs zloty
The conclusion is obvious – foreign currency loans are a very specific type of product, with a high risk factor, which many simply did not know about, or very often simply did not want to know completely, counting on … luck and considerable savings in relation to those who took seemingly expensive loans in PLN. Of course, there were assurances from everywhere that the Swiss franc was one of the most stable currencies in the world. The problem is that when deciding on a loan in this currency (as well as any other foreign one – as we have already mentioned at the beginning), we still need to think about how the fate of our Polish zloty will roll, because it is what you buy francs later.
Unfortunately, exchange rates cannot be predicted, much less in such a long period as mortgage repayment (which often reaches several decades). So you can say that a foreign currency loan has more to do with playing on the stock exchange and a bookmaker than a traditional loan.
What to do now with loans in francs?
Conversion of the loan into PLN
Those who took out loans in francs can save themselves in several ways (new foreign currency loans – not only in francs, but also in other currencies, banks practically no longer grant). First of all, be patient and do not act hastily. It is a bad solution today to convert the loan into PLN – at this point the franc exchange rate is high, and at the time we took it it was record low, as in the aforementioned 2008.
The difference in the price of our loan compared to the initial one will then be colossal, and by staying with the franc we can still count that its exchange rate will eventually fall – and with it – the amount of the installment we pay. At the moment of currency conversion into zlotys, we can no longer count on anything and we will only have to accept the repayment of an extremely expensive loan.
Use spread and online currency exchange
The solution can be, for example, each time (i.e. before paying the next installment) the purchase of Swiss francs on your own at a more favorable exchange rate than a banking exchange (here you can read how to pay the loan installment cheaply using the online currency exchange).
This option, of course, will not bring us significant differences, however, in situations where repayment of the loan is extremely onerous, it may turn out that even such small savings will be at a premium.