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Let’s go back to, say, 2005. The economy is accelerating, we earn more and more, we can afford better and better products. Imagine a group of friends. Ordinary party. Suddenly, one person announces that he intends to take a mortgage in PLN. 

Reaction? Surprise, surprise, lots of questions about the reason for such an absurd decision. Sounds familiar? It was in the years 2005-2007 that the largest number of foreign currency mortgage loans were taken out, most often in Swiss francs. But times have changed. In the current economic situation, is it worth converting a loan to PLN? 

The cost of converting the loan into PLN

In the aforementioned period (2005-2006), foreign currency as much as 70% of loans were granted. Poles threw themselves at the cheap and low-interest franc, hoping that this fairy tale will last forever. It did not last. Today, many young people are often faced with dramatic challenges – how to survive and loyally pay off draconian higher installments? No wonder that bank employees keep getting the question: “Can I convert a loan into PLN?”

The answer is not simple. It all depends on how much loan we have taken, how long will we still pay it back and what do we want to achieve? This is a very serious decision that must be carefully considered. And above all – not to be emotional.

People who took a loan, e.g. in the Swiss franc, at a very low exchange rate (even PLN 2.20-2.30 for a franc) are in the worst situation. Today, this currency costs well over PLN 3. What does it matter? Well, the bank at the time of currency conversion will have to recalculate our debt to the lender. 150,000 zlotys in terms of the franc price a few years ago was worth less than 150,000 zlotys in 2014. Simply put – after the currency conversion, we will have to give the bank more money. Unless we shorten the installment repayment period at the same time.

Another “trap” is the spread, which is the currency rate used within the bank. Each facility calculates this value differently. The rate on the day when we sign the annex on currency conversion will be decisive. When we are unlucky and the franc or euro exchange rate is high, we will get our hands on it again.

The loan interest rate is also very unfavorable. Those incurred in francs were popular not only because of the weak exchange rate of the Swiss currency but also because of very low-interest rates. At the peak moment, the difference between a loan in the franc and a loan in PLN was even 4%! We must pay special attention to this because after converting the loan into the native currency, the bank will calculate the interest rate for the loan in PLN. And it will hurt us for sure.

Why then did the word “currency conversion” become so fashionable? This is mainly due to the relatively stable zloty exchange rate and the high price of the franc. Many people wonder whether currency conversion will lower the loan installment. There is a good chance for this, but only in the case of short-term loans. In the longer term, further drastic fluctuations in exchange rates, including the franc, are possible. 

Nevertheless, I encourage you to spend the evening with a calculator and a loan agreement in hand. It is your calculations that will be the most reliable. Take into account that currently, loans in PLN are probably the cheapest in history – this is due to very low-interest rates. 

How much does the bank charge for converting the loan?

If your calculations show that currency conversion is still worthwhile – do not forget about one thing. Your bank, even if the most smiling people in the world work in it, is not a charity and simply wants to earn for you. Therefore, the vast majority of institutions want a fee for the currency conversion service.

The rates vary widely, but the most common are two items:

  • Commission for currency conversion
  • Fee for an annex to the contract

The rates vary and each bank has its own rules. Some of them give up the commission but order themselves to pay a decent rate for the annex. The latter option is generally always more beneficial to the customer. I have not encountered a situation where the bank demanded more than PLN 300.

In turn, commissions can increase the cost of the entire operation. The highest rate I have come across is as much as 1.5%. This means that if we want to convert PLN 150,000, the bank will deduct as much as PLN 2,250! With this loan amount, even 3 installments!

Therefore, traditionally I encourage you to carefully check your loan agreements and count all items. In this case, succumbing to emotions is completely inadvisable. So I just wish you the day when you finally pay off the loan. And in what currency – it is less important.