Bitcoin Forum

I never understood how would anyone use an altcoin for collateral, i mean if you want 1 btc loan but you have like 100 ltc, why not sell the ltc yourself instead of asking for the loan?

If someone believes the LTC/BTC exchange rate will increase then they would take that loan.

No, what im saying is that if you already have the amount of money you need in altcoins what would be the point of asking for a loan

Some people like to keep the coin. That's like saying if you're using your house as collateral, why not just sell it and buy bitcoins with it.

You cant compare your house to some altcoins. First of all selling altcoins is the easiest thing and also fast, selling your house is not. For me collateral should be something that you can sell somewhat fast and safe but altcoins as a collateral is like having 70k dollars and asking for a 50k euro loan using 70k dollars as a collateral, makes no sense.

They're still both assets.  Say you asked for a asked for a 500k loan.  You'd offer the deed of your house for collateral.

The value of altcoin change every minutes but when you use it as collateral, you still get the same

Its because people believe in the altcoins,and want to hold it, incase they think a price increase will happen.

That can happen with bitcoins aswell plus people only want "stable" altcoins like dogecoin or litecoin

some of them are just scammer, other want to have more choice

If they sell the collateral they are offering then they will have to pay exchange fees, and would miss out on any additional price appreciation between the time they take out the loan and the time they get the money to repay the loan.

A lot of loans secured by alt coins are likely done for altcoin trading so the loans essentially are allowing for additional leverage

But when you pay the loan back you have to pay it with interests bigger than the fees you would pay for exchanging the altcoins

The interest will probably be more then the exchange fees however the interest would not be more then what the borrower *hopes* the exchange rate will have increased since they got the loan.

Other than LTC and DRK, what's altcoin did use for collateral? I personally wouldn't accept altcoin as collateral, since hold that alts is very risky. Altcoin price changes every time and crash occasionally. 

Dogecoins i think are accepted aswell, namecoin, novacoin. Pretty much the ''stable'' ones

I've never really understood that either. Using money to get a loan of other money seems pointless. I think most people who take out loans here do so just for the feedback though so that's one reason. Using your account as collateral seems like a better option though sometimes people need the accounts to actually earn the money back.

Well i think 80% of people here that ask for loans are either scammers or not serious people. Ive seen a lot asking for loans to gamble, like wtf is that. When you ask for a loan in real life is to do something of value with it not gamble...

Most people won't give loans out to people who are suspected of going to gamble with it and quite rightly as you're almost certain to lose it, though I don't doubt some people take loans out under a different story and then gamble with it anyway.

I actually saw some that said they were going to gamble the loan and still received it, with collateral but still why would anyone loan money to a gambling addict

Most smaller loans (less the .1 or so) are almost certainly going to be for gambling, (what else could they be for?) I don't think lenders particularly care though as long as they are sufficiently protected with collateral.

Yes. But those who gamble are obviously never gonna use altcoins as collateral

They would if they both want to gamble on Prime dice (for example) but also have CLAIMS (for example) and think they will increase in value over the corse of the loan

You just said with collateral. So what the problem if he want gamble ? He have collateral

Well i dont know, moral reasons? Like why would you help a gambling addict to gamble?

You can use an exchange to convert the altcoin into Bitcoin / any other cyrpto currencies.
Someone can do whatever they want with their loan, even if they don't pay you back. That is why they have a collateral ;)

Well, if he honest want to use the loan for gamble even have collateral of course I will not give but not many people honest today

That's the sad part. And the only way to seem trustworthy is by having a good title below your username :(

The only scenario such collateral makes sense is what DAT said.

Imagine you have 100 LTC and you're absolutely sure that LTC price (expressed in bitcoins) will go up, so obviously you want to buy more of them. Selling 100 LTC to buy 100 LTC doesn't make any sense. So it's best to borrow bitcoins (using LTC as collateral), buy more litecoins. When (if) the price goes up, sell LTC, repay the debt and enjoy the profit (+ sell those 100 LTC you got back if you want to).

Simple.

Wait, what you are saying is that someone wants a loan of btc to buy ltc giving his already owned ltc because he believes ltc price will go up? Seems pretty stupid to me

Scenario:

You have 100 LTC and no other funds available

You know for sure that LTC price will go up within 1 week.

What do you do?

Wait for it to go up? You cant know it for sure so it would be really risky to get a loan. Lets say 100 ltc = 1 btc
So you will get a loan of 1 btc using your 100 ltc as collateral, you will need to pay at least like a 5% of interests so thats 1.05 btc back, the ltc price would have to go up by a lot to compensate all the trouble and the fees so not a really good idea

All true, but this is not a question of whether it's a smart move or not and what's the probability of the price going up.

Providing you know/believe/willing to gamble on price going up (higher than loan interest and related costs), then it makes perfect sense to take such loan. If all works as planned, you'll gain much more than just by holding and selling those 100 LTC alone.

But usually we always see people ask for small loan about few 0.05-0-5 btc and I not see people want ask for loan and use altcoin as collateral for expect the price will go up

some would like to keep the coin as a long term investment. usually the collateral is not of as much value as the loan.

I've been thinking about the same thing and you're kinda right - altcoins for collateral are... less than ideal. But the thing is that there aren't many good alternatives:
a) no collateral - legit borowers are drowned out by scammers
b) accounts - doesn't really solve the problem with scams
c) rl items - a little inconvenient in most cases

so yeah... if anyone figures out a system that would prevent most scams (you'll never get them all) while still being simple and fast  that person could make some nice money.

Accounts as collateral are good if you use escrow of course. Any other digital goods that are easy to sell and their value doesnt change much should be a good collateral

You can leverage your holdings this way if you have a good trade in mind.

As if you belive that your altcoin will rise in price but you need the btc funds for something, then you borrow the summ in bitcoins and give altcoin in that value as collateral and after you repay it, the borrower will give them back to you.
It's simpler and faster as physical collaterall.

It's very simple...they are asking for a loan despite the fact that they already have funds available.
They just don't want to risk their own money but hope to turn the loan money into a profit.

That makes no sense because they are giving a collateral thats worth 120% of the loan wich is THEIR money so they are actually risking more money.

Have you ever heard of leverage?

Lets assume you have 10000 LTC. and you think in the next 4 weeks LTC will go up drastically. You can now borrow 50 BTC and give the 10000 LTC as collateral. Now you buy more LTC with that BTC and now have nearly 20000 LTC long position. So instead of selling LTC and buying LTC ( ...) you can go the collateral loan route.

That is also how financial markets work basically, but due to repercussion, they can offer a lower collateral and thus a higher leverage.

I've never really understood that either. Using money to get a loan of other money seems pointless. I think most people who take out loans here do so just for the feedback though so that's one reason. Using your account as collateral seems like a better option though sometimes people need the accounts to actually earn the money back.
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I agree with that, except a lot of folks see bitcoin and other coins as an investment rather than a currency ie not money.

You would have to pay back, you know that right? You have 20.000 ltc but you have to give those 50 btc back, ltc would have to go drastically up as you said but its impossible to predict that. Anyways 99% of loans here are for values worth < 1 BTC so they are obviously not for that

Why 'drastically'? Any up movement will give you profit (depends on the loan cost and tx fees). And why do you think you can't do this with <1 BTC loan?

Well basically as you said fees and loan interest would kill your profit. Like lets say 1 BTC = 100$ and 1 LTC = 1$
You have 120 LTC and you take a loan of 1 BTC to buy 100 ltc. you wait for the price to go up and you sell them lets say the price went to 1.2$ per LTC so you would have 120$ or 1.2 BTC (excluding any fees) so you basically won 20$ for that loan, now you have to payback the loan wich will have an interest of 5-10% maybe more in some cases. If it is 10% you have to pay back 1.1 BTC leaving you with 10$ profit (excluding fees) wich is a profit but too small considering all the things you have to do.

$10 is more than zero. Sure, the amount is small, but the whole investment is not big either. So you should focus on % rather than amount.
$10 is ~8.3% of your original $120 worth LTC holding. If we're talking about short term, say 1-2 weeks, that's very good result.

And if the period is short and the collateral is solid, you could easily find a loan cheaper than 10%. Those 'all the things you have to do' probably won't take more than 1 hour of your time combined.

Again, if you have X amount of LTC and absolutely no other funds available, and you know for sure that LTC will go up very soon, what do you do? Nothing?

Im not saying its a bad idea overall, but its impossible to know if its going up that much because in my example ltc went from 1$ to 1.2$ wich is a substantial increase, if you are that good to predict that kind of stuff you dont need to borrow 1 btc, you can just do it with your money and make the earnings by yourself.

You're right. I reckon a lot of such small loans are not really taken to bet on exchange rate, but simply to earn a trust score.

The point of providing the collateral is to put a guarantee on the loan. Many might want to keep that Litecoin, so instead of directly trading it, they can receive it back by putting it as collateral. This way a person can use the value of the collateral without technically giving it up. This is under the circumstance the loan is paid back of course. Other reasons may include the exchange rate and fees associated with transferring over with crypto's.

I think the altcoins collaterals are only accepted if the lender believes the value is equal or higher than the loaning amount.. Or is expecting that..

It's great because if the person tries to run with the bitcoins, the lender can sell the altcoins to get their worth back..

i never understood those stupid loans and collateral, i mean what's the point of it? you can just use your collateral for your own loan, and resolve your problem

just do it with your friend or whoever, no wonder there are plenty of scammers in that section, they are there, only for that

I understand some kind of collaterals like in real life you put your car as a collateral because you need some money and you want to make an investment of some sort but at the same time you dont want to lose your car and thats why you dont sell it directly but use it as a collateral, but with altcoins? what are you afraid of? loosing your altcoins?

I think its better to exchange the altcoins and get some bitcoins instead of putting altcoin as collateral (120% of value of the loan taken). Plus Why pay interest when you can exchange the altcoins and get your own money to do the work? There are people who do interest free loans when you have a valid altcoin collateral but exchanging the altcoins and using your money  is always a good choice ;)