how a hard loan works
a hard loan is a type of loan between a lender and borrower occurring in two different counties and which is denominated in the hard currency hard currency refers to a monetary system or reserve currency that is widely accepted around the world as a form of payment for goods and services it usually comes from a country that has strong economic and political standing and it may not be the currency of either the borrower or the lender a hard loan substantially reduces the risk that would exist if the loan were denominated in less stable currencies there are some risks however if the borrower s home currency falls dramatically against the hard currency they may have great difficulty repaying the loan for instance if a brazilian manufacturer takes out a hard loan denominated in euros and the euro strengthens by 20 against the real over the life of the loan it will effectively increase the interest rate on the loan by 20 as well as the principal amount forex considerations on hard loans