If I take a loan of $1000 by agreeing to pay $50 + 10% interest each month what will happen if lets say the value of $1 doubles 4 months after? would I owe more money to the bank?

Are there loans that safeguard those things somehow?

  • What do you mean with ‘the value of 1 $ doubles’??
    – Aganju
    Nov 4 '17 at 12:39
  • $1 used to buy lets say 1 euro or a kilo of gold and now 1$ buys 2 euros or two kilos of gold
    – papajo
    Nov 4 '17 at 12:51

Some loans have a variable interest rate which can protect the lender from inflation and the borrower from deflation. How much protection it offers depends on how closely the interest rate follows the inflation/deflation rate. Most variable rate loans have limits on how much and how frequently they can adjust.

In your deflation scenario, the lender comes out ahead with a fixed rate loan already, since those future dollars are worth more than current dollars. The borrower doesn't owe more dollars, but the value of the dollars they owe is higher.

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