Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail
Investing Answers Building and Protecting Your Wealth through Education Publisher of The Next Banks That Could Fail

Hard Loan

What it is:

A hard loan is a loan between a lender and borrower in different countries that is denominated in a hard currency.

How it works (Example):

For example, a hard loan from a lender in Cambodia to a borrower in Thailand may be denominated in U.K. pounds sterling because it is a stronger and more stable currency than either of the other countries' currencies.

Why it Matters:

Although a hard loan is exposed to exchange-rate risk, a hard loan substantially reduces the risk that would exist if the loan were denominated in either of the less-stable local currencies.