Back-to-Back Loan
In doing business with people or companies overseas, particularly with companies in countries with unsettled political and/or economic environments, the two parties may wish to do their business in their respective currencies. My friend in Chile may want to use the Chilean pesos, being "sure" the peso will soar against the U.S. dollar. An American may think the U.S. dollar will remain stable against the Chilean peso.
Each party is seeking to make the deal more favorable, hoping that the currency fluctuation will be in their favor. Same maturity date, just two loans.
Related or Semi-related Video
Finance: What is a Credit Limit?39 Views
Finance, a la shmoop. What is a credit limit? Alright people well simply put the
maximum amount you get to charge or use on a loan or credit account, that's a [Credit limit definition written on a 100 dollar bill]
credit limit. So yeah it's that thing that keeps toddler Joey from ordering
two hundred thousand dollars worth of Snickers bars. [Toddler looking at the snickers bar]
If you accidentally you know leave out your Amex. (Illustrative example time) If you have a ten thousand
dollar line of credit or credit card you can't spend $20,000 on a trip to Vegas,
sorry. You might be able to go on a smaller trip to Atlantic City but once [Picture of Atlantic City]
you hit that 10 grand well the party's over until you pay some of that money [$10,000 flashing in red]
back, and by the way taking that smaller trip and then putting everything on red [Chips landing on a roulette table]
22 in hopes of funding your next trip to Vegas? Probably not the soundest
financial planning... sorry, let's keep it real. [Guy putting on a serious face]
Up Next
What is a line of credit? A line of credit is kind of like a loan. A bank gives a borrower a line of credit, which basically says they can borrow â...
What are credit ratings and how are they interpreted? Credit ratings describe a borrower’s likelihood to pay back their debts; it’s a look at h...
What is an Accredited Investor? An accredited investor, according to the SEC, is an individual with income of $200,000 or more and $300,000 and abo...
What does a stockbroker do? Stockbrokers use money from investors to invest in the stock market. Their first job is to go out and find these client...