Collateralized Loans

       Collateralized loans are a means through which it is possible to receive a line of credit by putting some assets up as collateral.

     Say you need $5,000 and you own 200 ETH. You dont want to get rid of your ETH possessions because you are extremely certain that the price of Ethereum will rise in the coming 6 months, but need cash now. So as a means to access some liquidity, you go to a loan provider, post 25 ETH as collateral (ETH is $400each) coming out to $10,000 as collateral for the $5,000 right now. You have 6 months to pay back your loan + premium (say $5,250 total). When you pay back, the assets that you posted as collateral is release to you. But, there is a twist. While your assets are locked in collateral, ETH rises to $800. By rising up in price, the collateral:loan ratio re balances and the $5,000 you received are payed off, your loan is closed, the $5,250 is deducted from the loan, netting you the loan amount + the price appreciation of your posted/collateralized assets.

      Related Terms:



BTC: bc1qcskmel9llhrdqj3arxyqnennx4ashvfutlreyy
LTC: ltc1qa0fj4lcu5365rep50aza5fqqvx8ef0afemh6s5
ETH: 0x071D72dbc48ad2Fe35daE256eCF0834C5dde688c
DASH: XgXHqVyJiQNdVVszH9cnqCP4uWcP8tVxdK
BNB: bnb1mau4j8kry0jgw45ufy69hvhd0k04llet8fk2p6

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