loans if euro goes bust?

kdowling

If a person has a loan of €500,000 for example and the euro goes bust tomorrow.
what would happen the loan?

PCPhoto

it would be transferred into whatever new currency we adopt at whatever exchange rate....so your €500,000 debt would prob change to €600,000 or higher.

kdowling

PCPhoto wrote: »

it would be transferred into whatever new currency we adopt at whatever exchange rate....so your €500,000 debt would prob change to €600,000 or higher.

wouldn't you be crazy so to take out a large loan until this craic with italy and spain is resolved?
i suppose if the keep kicking the can you could be waiting a long time!

PCPhoto

you'd be crazy to take out a 500,000 loan unless you earned at least €150,000 a year - and could guarantee your job.

Boskowski

Seems like a clever idea. Amongst all the big players fueling the crisis Joe Soap should start betting against the €uro too. Sure way out of this crisis, but hey what does Joe Soap care as long as he makes his shilling...

Nijmegen

A lot of folks already have a big loan in euros. Their mortgage.

If the euro went bye-bye tomorrow and your loan were valued in Euro and you're now being paid in pesos Punts Nua, which would devalue 40-60% on Day 1, well I'd suggest the whole damn world is falling apart so you might as well tell the banks to stuff it.

Government ought to do that, as it owns the bank debt anyway: If the Euro goes then we're so far out in the wind we might as well default on the whole fooking lot, private and public debt (which is all public debt these days anyway...)

In the final days of World War 2 very few people were convicted for looting. In the event of Eurogedden we might as well flip the birdie, whole damn financial world will be coming down round our heads like it's April '45 in Adolf's bunker.

bbam

i doubt seriously if Joe soap will be let off.. Even if the banks/government have some of their debt written off... they'll keep the small men under the thumb and milk them for whatever can be got...

North_West_Art

you could take out a large loan now, buy Sterling, fake your own death, hire a rib to bring you Scotland with your briefcase of cash, and start anew

keithclancy

If it did happen I think you'd see allot of people looking for work in the North to pay their Euro/Punt Nua mortgage

damino

It is estimated that the new currency would plunge best conservative figure 40%/50%, so straight away the cost of a mortgage or loan would increase by that amount. Now the IMF demanded countries in receipt of their loans that they increase interest rates way above most countries to attract investment into ones currency, hence Ireland's interest rate would increase significantly like what we saw in the 1980's about 16% or even the dizzy heights of 25%. So every 1/4 increase adds about €16-€32 for approximately €250K borrowed. Hence nearly everybody with reasonable sized mortgages would be in arrears and businesses would go bust. Iceland was lucky in that it was self sufficient in electricity and almost endless supply of fish. What has Ireland got to flog? The multinationals would leave Ireland are their profits would fall in value when they were transferring their gains outside of Ireland.

sollar

PCPhoto wrote: »

it would be transferred into whatever new currency we adopt at whatever exchange rate....so your €500,000 debt would prob change to €600,000 or higher.

What if you have the loan with an Irish bank?

View

kdowling wrote: »

If a person has a loan of €500,000 for example and the euro goes bust tomorrow.
what would happen the loan?

It'll be collected in pounds of flesh instead.

cadete

sollar wrote: »

What if you have the loan with an Irish bank?

does anyone know would the loan be changed into punts aswell?

supermonkey

If the euro goes bust it will be because the Germans leave.
Germany, France, Austria, Sweden, Holland, Belgium, Luxembourg, Finland, Malta, Cyprus, Slovakia, Slovenia will go into Euro 2 maybe some of Belgium, Malta, Cyprus, Slovakia, Slovenia.

Italy, Ireland, Portugal, Greece, Spain are left in the Euro which ceases to be a meaningful currency.

Our debts are in Euro not Euro 2 or Core Euro or whatever currency the Herberts set up without us.

(Can't happen anyway the ordinary Herbert in the street wouldn't trust France not to be the next Italy and the whole thing's a joke without France).

The Corinthian

kdowling wrote: »

If a person has a loan of €500,000 for example and the euro goes bust tomorrow.
what would happen the loan?

Depends on where you took out your loan. If you borrowed from an Irish institution what would likely happen is that debt would first be converted to Punt Nua (or whatever currency Ireland moves to) and any subsequent devaluation would not affect your debt.

If, however, your loan was from a foreign institution, then a devaluation would cause your debt to inflate, in real terms as you're earning Punt Nua and your debt would stay in Euro (or whatever other currency you borrowed in). This is ultimately the problem with borrowing in other currencies (and one of the reasons for the Euro), as the Poles discovered - many earned their money in EUR/GBP, took out mortgages back in Poland in CHF, due to the low interest rates, and got screwed when the PLN lost over a third of it's value against the CHF.

Another consequence would be that Irish financial institutions would take a big hit, because ultimately they borrow from foreign institutions. While this would not affect consumers directly, indirectly this would likely lead to increased charges and interest rates as they seek to recoup some of their loses. In some cases it may lead some Irish financial institutions to insolvency and potentially trigger another, localized, banking crisis.

Caveat: Even with a debt with an Irish institution, it would be advisable to read the small print, as your debt may remain in Euro, depending upon the terms of the loan.

pegasus1

supermonkey wrote: »

The Swedes have their own currency, the Krona!! so they would not go for the euro2 either!;)

jimmycrackcorm

The Corinthian wrote: »

Depends on where you took out your loan. If you borrowed from an Irish institution what would likely happen is that debt would first be converted to Punt Nua (or whatever currency Ireland moves to) and any subsequent devaluation would not affect your debt.

My guess too seeing as so much Irish Bank Debt is now held by the ECB then it would be converted back and owed to the ECB.