What is the point of collateral?

[RyEter]

If you have a good bticontalk account, but you want to keep on using it for long term. You need some bitcoin to spend now, you can borrow with the account. When you have the funds to return the borrow, you still keep the account.

Well said, in most cases you don't want to liquidate your assets for a small loan so you offer some security for the lender in return. Nothing wrong with borrowing money to finance short term expenses. Having said that, I won't take a loan..

Yes, I agree but the thing is it is not worth too much. The most a BTCtalk account would be worth is probably like 2BTC.

Loans like that do not really funnel ideas, businesses and innovation. Loans like that are just a quick fix for a spending desire.
Also I could sell my account and rebuy another one UNLESS I have a good reputation among the forum peers and post a lot.

If it's just another average sr.member i might as well sell it.

[Monnt]

I know I will recieve a lot of criticism for this post, maybe even a few neg reps.
But I believe I have a valid argument here.

Why borrow money when you could just sell the collateral in the first place?

The point of the collateral breaks down here, no matter what you say.

The reason why people borrow money is because they need/want that money. They do not want to sell what they have for the money the need/want.

It does not make sense and might even be a bit stupid to think something like,
"Oh, I need $500 to pay my bills…I have an iPad lying around let me just send that to a guy online and he will give me a LOAN, when he gets the iPad. If I pay him back he will send my iPad back to me!"

It does not make any logical sense whatsoever.
It's like buying $20 for $25.

I think the "no collateral no loan" sticky should be replaced by this post because it just makes more sense.

Maybe, just maybe it would make a bit more sense if the lender asked for <50% collateral but the 110%-115% is just plain ridiculous.

Not trolling here, I am being very serious.

Because a) It provides security to the loaner and b) The loanee might not want to sell the collateral because he either needs it or he believes the value of the collateral is going to go up significantly after he repays the loan.

[Amph]

here an example why, you need money to pay somethign urgent like a portion of the money that is needed to buy your new house, but you don't have the money

now you burrow them and inexchange you give them your car as a collateral, you can not sell your car because it's still a new machine and you would lose money in this way also you need your car to move the things in your new house

[bhokor]

In financial world things are a little diferent.

For example if i buy bitcoins with my own money for 100$ after a week i sell it for 120$ (profit= 120-100=20)
but if you do the same with a loan you can buy 1000$ and after a week you sell it for 1200$ (profit=1200-(1000+week interest)
i think it is about scale

[BigBoy89]

In financial world things are a little diferent.

For example if i buy bitcoins with my own money for 100$ after a week i sell it for 120$ (profit= 120-100=20)
but if you do the same with a loan you can buy 1000$ and after a week you sell it for 1200$ (profit=1200-(1000+week interest)
i think it is about scale

Exactly you have nicely described the point about how it works in financial world now things are changing because it's the matter of credit risk because people are not ready to give out loan like they used to do earlier to gain profit because there is no surety or security that the person who take loan will be able to repay it back because of ongoing market crisis I am talking about Middle eastern market. Soon there will be Bitcoin loaners I think there are already few out there in the market.

[Decoded]

Most people aren't in your situation. They give the collateral as something that is worth alot, but don't want to sell it.

If you don't have this item, you'll have to find someone who accepts no collateral.