Do you want to borrow money from a bank in the European country? How do you explain the legal requirements and the difference between real estate and foreign currency loans? We also discuss the risks of Forex, the best brokers for forex trading and binary options trading.
Fraudulent investments on shady trading platforms
Customers are lured into the trap by dubious investment products and promises of high profits. For the victims of fraud, highly speculative investments usually result in a total financial loss.
Find out more about investment fraud on dubious trading platforms.
What to look out for when borrowing money from European countries
It’s important to keep in mind that the contract is written in a different language! If necessary, advice will be provided in a foreign language. Only sign the contract if you know what you’re signing. Foreign law is usually applicable when you enter into a loan agreement with a bank in another EU country. However, some legal requirements apply across the EU as a result of the European Consumer Credit Directive, including:
- Information on the loan’s duration
- Information on the total amount of the loan
- Ban on interest rates
- Estimated contract costs
- APR-related information
- Information on the interest rate
- The delivery of a repayment schedule (if requested by the customer)
- Issuing a standardized form that contains all pertinent loan information
- Detailed information about the service provider (lender or credit intermediary)
- An indication of how to calculate a loan brokerage commission.
- Right of withdrawal every two weeks
Please note that these EU requirements do not generally apply to real estate financing loans.
Loan offers that are dubious
There are always dubious loan offers on the Internet, especially in social networks. Lenders are alleged foreign private individuals. There is no need to run a credit check.
If you accept such an offer, you will be hit with additional costs, including fees from foreign ministries in some cases. If you pay, there are additional costs, such as legal fees, bank fees, and so on. Consumers, on the other hand, are never shown the loan amount. Read more about loan fraud here.
Tip: If you’re offered a loan without a credit check, be wary. If you are charged costs before the loan amount is paid out that you were not informed of, this is another sign of fraud.
Loans in foreign currencies and real estate
Real estate loans are subject to EU-wide uniform rules. On the other hand, there is a hidden exchange rate and currency risk with foreign currency loans.
Loans for special situations in real estate
Real estate loans are frequently in the five-digit range. The repayment period may be several decades long. Consumers frequently find themselves in financial difficulties as a result of their inability to repay their loan installments. As a result, don’t take any chances. If you don’t understand the contract’s content, you should seek advice from an interpreter and have a certified translation of the contract made.
Consumers in Europe have a fourteen-day cooling-off period for real estate loans. This is how the contract can be terminated. The period usually begins when the contract is signed. The deadline is extended even further if the bank fails to properly inform you of your withdrawal right. This is a right that you don’t always have when you’re traveling.
Since March 2016, the following uniform real estate loan regulations have been in effect throughout the EU:
- The European Leaflet (European Standardized Leaflet) (ESIS). It contains information on the loan’s main characteristics, such as the loan amount, term, type of loan, type of interest rate, fixed interest rate, and collateral, among other things. It also includes the interest rate as well as the amount of each installment.
- Calculation of the charge’s annual percentage rate.
In addition, EU minimum standards now apply in many areas:
- A reflection period of at least seven days or a right of withdrawal of at least seven days.
- Information on the costs, repayment, and interest burden, for example.
- Mandatory credit check.
- Prohibition of so-called linked transactions (banks have traditionally linked loan agreements with products that consumers do not require, such as checking accounts, life insurance, or residual debt insurance). Caution: banks can still “bundle” loans with other products if it makes more sense and is less expensive for consumers than buying them separately.
- Early loan repayments are subject to fewer restrictions.
- Stricter supervision of construction loan providers.
Loans in Swiss Francs could be extremely profitable at times. Consumers in Europe who needed a loan but were unable to obtain one from their home country’s banks turned to foreign lenders. Austrian banks were making low-cost offers. Consumers in Europe hoped that a stronger euro would benefit them. Because the loan amount would have been less expensive if the euro had risen. In fact, the situation was reversed, and consumers were suddenly confronted with a slew of issues.
The risks of foreign currency loans:
- The consumer bears the exchange and currency risk: The consumer has to repay a higher amount if the currency in which the loan is held increases in value.
- Furthermore, there is an interest rate risk, as the interest rates in the currency in which the loan is held may differ from the euro’s interest rates.
- Frequently, the loan must be repaid at the end of the contract term. The loan’s final maturity is discussed. As a result, currency and exchange risks are even more serious.
- The consumer contributes to a savings plan before the final maturity date (so-called repayment vehicle). Many of these repayment vehicles have lost value as a result of the financial crisis.
- Foreign currency loans have become significantly more expensive, owing to the recent appreciation of the Swiss franc.
Since March 2016, new rules for foreign currency loans have been in effect:
- Consumers have the option of converting their loan into a different currency. This is true if the value of the unpaid installments rises as a result of a rate increase (in Europe 20 percent ).
- If exchange rate fluctuations cause the value of the remaining installments to rise by at least 20%, the bank must notify the customer.
Remember: Foreign currency products were and still are risk products