Question about collateral?

[BitshireHashaway]

I'm not sure I get the advantage (for the person asking for a loan) to provide collateral. If you are providing equal or higher than the loan amount in collateral, why don't you just sell the collateral and use that to fund the loan yourself? That seems to be a lot simpler on your end because you won't need to worry about paying anyone back.

Can someone explain the advantages or how it works to me?

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[cyclops]

https://bitcointalk.org/index.php?topic=313401.0

[austin]

If someone has, for example, 100ltc and doesn't want to sell them at the current price but still needs a loan, it's to their advantage to use it as collateral. They can pay back what they borrowed and keep their litecoin.

[monbux]

If someone has, for example, 100ltc and doesn't want to sell them at the current price but still needs a loan, it's to their advantage to use it as collateral. They can pay back what they borrowed and keep their litecoin.

this.
Sometimes people are in need of BTC, but they have other holdings they don't want to sell, so they take a loan.

[xypos]

I agree with you. Most of the time, it is pointless to take a loan if you have collateral. You will have to pay back more than you get.
But sometimes it can be usefull if you are sure that you will make a quick profit with a low risk.

[Snail2]

I'm not sure I get the advantage (for the person asking for a loan) to provide collateral. If you are providing equal or higher than the loan amount in collateral, why don't you just sell the collateral and use that to fund the loan yourself? That seems to be a lot simpler on your end because you won't need to worry about paying anyone back.

Can someone explain the advantages or how it works to me?

Let's say you have a well built portfolio on BitFunder just two days before the next dividend payment. Suddenly you need more funds for gambling on MtGox. Would you be happy to sell some or all of your shares? Probably not. So asking for a loan and using your portfolio as a collateral could be a good option (if your gains on Gox and your dividends together worth more than the interest).

[Abdussamad]

It is said that banks lend money to people who don't need it.

[Lauda]

If someone has, for example, 100ltc and doesn't want to sell them at the current price but still needs a loan, it's to their advantage to use it as collateral. They can pay back what they borrowed and keep their litecoin.

this.
Sometimes people are in need of BTC, but they have other holdings they don't want to sell, so they take a loan.

What if you have no other coins? This collateral is nonsense *sigh*.