Bitcoin Forum

I can see the point of a "lender".
You give bitcoin with a guarrantee and some days later you earn x% of what you give.
Zero risk for you only gain right?
Totally fine with that.
But....what is the point for a "borrower" to ask for a loan and to have already other currency?
You already have the money where is the problem?
Open an exchange account and sell your currency for bitcoin.
What am i missing?

Sorry i'm trying to understand.

There are transaction fees associated with moving cryptos around and not many people want to relinquish their investments just for a loan, it is similar to asking the following;

If you already own a house, why do you need a loan to buy a car? Just sell your house!

The borrowers don't want to exit their positions in the coins they hold.

For example, I hold NEO and I expect it to grow in the upcoming days, but I also need money to invest into ICO I got whitelisted in.

This is why I'm eager to borrow money and give my NEO as a collateral.

Taking the bank loan illustration, one gets a loan only if one can show a collateral. Nobody gets a bank loan if they have nothing. And those who apply for a loan hope that they can use the loan amount, make more (it could be money or knowledge in case of education) and can repay that amount within time.

Similarly in the crypto world, lets say one has btc as well as alt in exchanges. They do not want to touch those positions.

They see some new position which shows/has some promise/value. Then they take a loan, invest in that coin in the hope that they could repay in time by making more. Even if they could not make more in time, they can always use their existing btc and repay the loan amount in time.

Hope this clears your question  :)

There is absolutely risk that is involved with this. An altcoin could crash leaving the lender uncovered for the loan and if the borrower does not pay back it's the same consequence in the end for the lender, they losing money.

Of course there is much less risk involved with collateral loans than with no collateral loans, which is why collateral loans are often charged at a lower interest rate than no collateral ones.

Collateral loans make the most sense when the borrower wants to speculate and go long on a certain asset, and needs some short term cash to spend or even buy more of these assets.

If someone has altcoins then I don't quite understand the need for a loan and it's not to avoid transaction fees because when they repay their loan they have to send the money back to you which requires a transaction fee. With things like shapeshift now it's becoming easier to transfer alt coins into bitcoins very quickly.

For example you both DOGE at 20 sats, but since DOGE has not moved for quite some time you needed money for rent or something else. What do you do? Sell for 19 sats and lose on it? No. You get a loan and use those DOGE as collateral. So you keep to stay in your apartment and when DOGE goes up then boom. You profit because you did not lose the opportunity if you sell just because you needed to pay your apartment.

What I don't understand are people that don't understand the concept of collateral.

MY viewpoint is THIS: what is the point of "offering" a loan if you're gonna be a greedy pig and ask for "collateral" anyway... The lender can just as well then take his coins to ANY good exchange like bittrex etc and exchange them for BTC (and not worry further) You either wanna help someone or you don't. Collateral is just another hidden word for "greed" Sooo... all you would-be loaners/sharks who keep asking for "collateral" - GO FUCK YOURSELVES!! >:( >:( >:(

You are free to open a landing service and offer loans without collateral to strangers on the internet. In fact, please do this and then tell us your "viewpoint" again.

And if by "You either wanna help someone or you don't" you mean to donate hard earned coins for free to that someone (because this is the end result of 99.99% of no collateral loans), than you are correct: Nobody wants that.

Because loans are not charity ::)
Lenders want to gain profit from their loan service or at least get the same amount that they've loaned, and collateral are used to ensure that you as the lender will pay back the amount that both of you has agreed to.

Collateral are actually used not only in Bitcointalk, but in every other places don't believe me?
try to get a loan from Bank for thousands of dollars without collateral let'see whether the Bank will accept it or not ;)

If you want to obtain money without collateral, I suggest to try your luck at gofundme, I heard there are a few dumb campaigns that got pledged there :)

While my question maybe offtopic - its somehow on topic, its question about collateral and escrow(no need to make post about it). So here it goes:

Lets say for example person wants 100$ BTC loan, and has graphic card as colateral(250$ usd value). 2 people decide to use that as collateral and escrow... So how that works? Person sends graphic card to escrow, other person sends him money, and when he returns money, escrow man returns graphic card?

exactly, "other "person send him money after escrow confirm that collateral secured.

Isee.. Thanks for response.. All my doubts removed :D

In theory this is exactly how this should work, but in practice it's hard enought to get a loan with a physical collateral, especially electronics. There are fees and also the risk of damaging the collateral associated with the transportation. It is much easier for the borrower to get the loan from pawn shop in his area, than from this forum, if it has a physical collateral.

However, there are some physical collaterals that have a very high chances of being accepted by the lenders.  A very good example is a casascius coins.