RE: Playing The Dangerous Loan Game
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I don't really understand how the lending works in the CE-FI. In case you are default how they gonna force you to pay?
Having a loan is a bit stressing, I am not that confident to borrow something in crypto just yet. Maybe I will stick to the real bank loan at the moment while building my self to a loan free by crypto.
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That's because you're thinking of a fractional reserve loan arrangement that we have in fiat, in crypto you need to provide collateral. So if I wanted a $25 000 today I need to put up 1 BTC as collateral and lock it into escrow. When I pay the loan back, I get my BTC back, if I don't pay the loan back, my collateral is liquidated to may the borrower + interest.
I understand, it's not something you should take lightly or mess around with if you're not sure, but its a product that will become normalised over time, its the same thing the rich do with their assets. They borrow against their stock or retail portfolios all the time
thank you so much for the explanation. Now I understand a bit about how it works. Because at first I think it doesn't need any collateral into the agreement or the transaction.
Well it just kind like putting the land certificate in to the bank, when you want to borrow from the bank. But with so much easier and faster isn't it?
at the moment i think i have to stay away from it. maybe next time when i have some BTC to put into collateral, or when i really do need some fast loan.
Yes, I would say it's pretty much the same as borrowing against your home or if you have stocks you can borrow against it in your brokerage account. Yes it's much faster and easier but many people don't need it right now, I think its more a product we would use once we're deep into the trillion-dollar market cap