Taking out a loan in USD can have several drawbacks. Firstly, currency exchange rate fluctuations can impact the repayment amount, leading to unpredictable costs. If the borrower's local currency depreciates against the USD, repayment becomes more expensive. Additionally, foreign exchange transaction fees may apply, increasing the overall borrowing cost.
Political or economic changes in the US can also influence interest rates, affecting the loan's affordability. Furthermore, currency risk and the potential for higher interest rates compared to domestic loans can add financial strain. Borrowers must carefully consider these factors before opting for a USD-denominated loan to avoid potential financial challenges.