Question regarding collateral: Why in Cryptos?

[GBattaglia]

So I've been thinking about collateral for a while, and I can't quite understand why someone with proper collateral really needs a loan in this community.  In many cases for a .5BTC loan, many lenders will request 20LTC or similar as collateral.  Now while I understand that the lender should be insured in some form in case the lendee cannot pay back the loan, I just don't see the point with alternate currencies.  If the person requesting .5BTC has 20LTC, why doesn't he just exchange the LTC for BTC and not request a loan? 

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[jonanon]

I've always thought that, I thought the whole idea of a loan was because you didn't have any money.

I suppose if you offer alt coins as collateral you (in theory) are protected if they increase in value.

[austin]

So I've been thinking about collateral for a while, and I can't quite understand why someone with proper collateral really needs a loan in this community.  In many cases for a .5BTC loan, many lenders will request 20LTC or similar as collateral.  Now while I understand that the lender should be insured in some form in case the lendee cannot pay back the loan, I just don't see the point with alternate currencies.  If the person requesting .5BTC has 20LTC, why doesn't he just exchange the LTC for BTC and not request a loan?  

Some people want to hold their altcoins and still need a loan so they are used as collateral. It's much easier to send a cryptocurrency rather than an expensive item through the mail, but you can definitely still offer physical items as collateral. Personally, I wouldn't want to reveal my location to a newbie asking for a loan, but it can work if you get a P.O. box or the collateral is sent to an escrow.

[Tomatocage]

It's just like a car title loan or home equity loan.

[GBattaglia]

It's just like a car title loan or home equity loan.

Not in my opinion [and correct me if I'm wrong], but taking a loan out against your home makes sense for several reasons:
1. You still utilize your home once the loan is taken out.
2. Your home is kind of a necessity, you can't quite part with it.
3. Exchanging your home for cash isn't anywhere near as simple or easy as exchanging a crypto for BTC.

All three of those don't apply whatsoever to Crypto collateral. 

[Welsh]

It's just like a car title loan or home equity loan.

Not in my opinion [and correct me if I'm wrong], but taking a loan out against your home makes sense for several reasons:
1. You still utilize your home once the loan is taken out.
2. Your home is kind of a necessity, you can't quite part with it.
3. Exchanging your home for cash isn't anywhere near as simple or easy as exchanging a crypto for BTC.

All three of those don't apply whatsoever to Crypto collateral.  

One of the reasons many people ask for loans even though they have collateral to equal value is because they don't want to lose what they are giving as collateral, so they are not prepared to sell it. They look for a loan and once they get the loan and repaid it in full they will receive their collateral back. So in theory they haven't lost any thing because they have paid back without losing the collateral.

Many people like to hold onto alt coins because of pump and dumps or they think they will be more value than Bitcoin one day or simply because they can pay for services/goods in alt coins but can't in Bitcoin. I believe there are a number of reasons other than the select few I have mentioned. I've never borrowed money from any one so I may be wrong but, this makes sense to me.

[Tomatocage]

Not in my opinion [and correct me if I'm wrong], but taking a loan out against your home makes sense for several reasons:
1. You still utilize your home once the loan is taken out.
2. Your home is kind of a necessity, you can't quite part with it.
3. Exchanging your home for cash isn't anywhere near as simple or easy as exchanging a crypto for BTC.

All three of those don't apply whatsoever to Crypto collateral. 

I meant that you're securing a loan with something of equal or greater value. And I think you're ignoring the fact that almost all loans in this forum result in defaults.

[Bobsurplus]

If the person requesting .5BTC has 20LTC, why doesn't he just exchange the LTC for BTC and not request a loan? 

because selling the ltc now @ 20$ each for example would be a stupid decision especially if the ltc goes up in value over the term of the loan.

you would need more money to buy back the same amount or would have to buy back less coins.

Hope this cleared up[ the air a bit.

[GBattaglia]

Not in my opinion [and correct me if I'm wrong], but taking a loan out against your home makes sense for several reasons:
1. You still utilize your home once the loan is taken out.
2. Your home is kind of a necessity, you can't quite part with it.
3. Exchanging your home for cash isn't anywhere near as simple or easy as exchanging a crypto for BTC.

All three of those don't apply whatsoever to Crypto collateral. 

I meant that you're securing a loan with something of equal or greater value. And I think you're ignoring the fact that almost all loans in this forum result in defaults.

I'm not ignoring the fact, I'm just going off of my current experience with loans handled here, that is all. 

If the person requesting .5BTC has 20LTC, why doesn't he just exchange the LTC for BTC and not request a loan? 

because selling the ltc now @ 20$ each for example would be a stupid decision especially if the ltc goes up in value over the term of the loan.

you would need more money to buy back the same amount or would have to buy back less coins.

Hope this cleared up[ the air a bit.

That makes sense, especially in regards to loans where one is using a newer alt, but not so much in the case of BTC and LTC.  If you are getting your loan in BTC, the fluctuation between the exchange rate of BTC/LTC has been rather constant for a long time now.  That is not counting the spikes into the .03 zone and the dips into .01 area.