What is the point of collateralized loans ?

[Tytanowy Janusz]

You need to go to wikipedia and read the definition of "profit". The loan did not benefit the borrower in this situation. Exposure to currency risk of the token you hodl and used as collateral gives you profit, not laon. You borrowed 10 000 doge and get 10 000 doge -fee, where you see profit here?

The "idea" (which I agree is stupid but there are so many that does it) is the fact that you could potentially do it twicefold if you can actually find a legit place for it. Basically it means that you have 10k doge, and you get 10k doge more with it, and if you can somehow get it in fiat terms, that means you paid for 10k doge price at that point, let's say it is 760 dollars you paid for, and you have to pay back 800 dollars with interest, or even 900 dollars doesn't really matter for this example.

The idea is that if you paid 760 bucks for 10k doge and bought that, and also showed that as collateral and got another 10k doge for 760 dollars or all your doge will be gone, that means if you lose money, it will be paid from your own dogecoins, however if you earn money, let's say doge goes up and now 10k doge worths 1000 dollars, you will be paying 760 of that back, plus interest, whatever is left is your profit on top of that 10k you already owned. Of course this rarely happens anywhere, they are all weird type of loans.

Well... iamsheikhadil needs to learn the definition of "profit" and You need to learn how loans work and ... the definition of "profit". No one is borrowing 8k doge using 10k doge as collateral. This does not make sense. And even if you will do it, you will not earn more thanks to that even if doge will pump. You will give back 8k doge, get back your 10k doge and where is your profit here? You had 10k doge before loan, you have 10k doge now.

You could get USDT loan using doge as collateral and buy more doge with this usdt and earn on pomp but again... You are not earning on loan here. You earn thanks to your decision to invest USDT into DOGE. You earn because you exposed your money to currency risk and not by borrowing money.

There is no way to earn on getting loans. You can earn using borrowed money well.

[1715204941]

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[1715204941]

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[YOSHIE]

How can you make money from taking this type of loan ?

You mention all the costs and inputs that occur on the loan, it will happen.

Back to the question point, "income" depends, what you borrowed for.
Loans are divided into many categories.
• personal needs loans.
• investment loans etc.

Well, here are two options that can be answered, loans, if you use that money to buy Bitcoin at a low price of 1-2 months, because you sell Bitcoin when the price rises, the loan is returned, otherwise your risk.
the profit you get, you can use it again to invest, that's how to make a loan.
One more thing, if you use it for personal needs, you automatically have to look to cover the loan, without income.

[Jemzx00]

How can you make money from taking this type of loan ?

You mention all the costs and inputs that occur on the loan, it will happen.

Back to the question point, "income" depends, what you borrowed for.
Loans are divided into many categories.
• personal needs loans.
• investment loans etc.

Well, here are two options that can be answered, loans, if you use that money to buy Bitcoin at a low price of 1-2 months, because you sell Bitcoin when the price rises, the loan is returned, otherwise your risk.
the profit you get, you can use it again to invest, that's how to make a loan.
One more thing, if you use it for personal needs, you automatically have to look to cover the loan, without income.

Agreed you can't always make an income when loaning. First of all, when loaning crypto or any money, you are guaranteed to have a negative balance on you no matter if you have a collateral provided.
Just as Yoshie explained, you can make an income if you loan for investment reason which have a guaranteed return because if not, then you're just like gambling with no way of knowing if you lose and broke or win and multiply your earnings.
Collaterals are there for safe keeping for the borrower to make sure their money is safe in case any default has happened.

[hopenotlate]

Purpose of giving a collateral to get a lon is quite simple and logic and works the same way in crytpo or real life provider : lets say you have something valuable you worked hard for and don't want to sell ; when you need some money for real life needs, businesses deals or whatever the needs might be you can borrow them from other poeple/banks/providers or cryptoservices ( like smartcredit.io am currenlty advertising in my signature).
Your collateral protect the lender from the risk you deafalt on your loan and you will have it back when you repay your loan because you value it more that its monetary value.

Profiting from borrowing? You can do that in case yuo have a businesses opportunity that gives you a return higher than the interest you have to pay on your loan.

[skarais]

You mention all the costs and inputs that occur on the loan, it will happen.

Back to the question point, "income" depends, what you borrowed for.
Loans are divided into many categories.
• personal needs loans.
• investment loans etc.

Well, here are two options that can be answered, loans, if you use that money to buy Bitcoin at a low price of 1-2 months, because you sell Bitcoin when the price rises, the loan is returned, otherwise your risk.
the profit you get, you can use it again to invest, that's how to make a loan.
One more thing, if you use it for personal needs, you automatically have to look to cover the loan, without income.

For this type of loan for investment purpose, in my opinion it will only increase the risk of bad loan. The main thing that concern me is price fluctuation, which can make it difficult for borrowers to pay off overdue loan. It is not advisable to borrow a certain amount of fund just to invest in crypto, if it were me then I would never have done it. Even though there is an opportunity to make a profit, I think borrowers often have problem repaying loan.

Loan for personal need are only more realistic to do even though we have to pay a certain amount of interest when paying it off. Even though I have to get some money out of my pocket when I pay, at least I can still avoid bad loan.

[CarnagexD]

There's none. It's literally made for people desperate enough to let themselves in the hellish trap that is collateralized loans. Imagine getting less than what you want to borrow and then still having to pay the whole amount as if they just didn't took a fee out of the blue. So never ever take collateralized loans unless you want to play life in hard mode.

[tippytoes]

There's none. It's literally made for people desperate enough to let themselves in the hellish trap that is collateralized loans. Imagine getting less than what you want to borrow and then still having to pay the whole amount as if they just didn't took a fee out of the blue. So never ever take collateralized loans unless you want to play life in hard mode.

I am not a fan of such platforms also. Instead of making your life easy, it will give you headache instead. If you have the money in the first place, I think the better thing to do is just be contented for what you have and just make use of it. Instead of borrowing and giving it as a collateral loan. You may end up losing all your money, if you can't pay them on time. There will be more problems that may arise if you forgot your responsibilities as a borrower. As you implied, they will make your life difficult instead of alleviating your financial problem.

[RealMalatesta]

No one is borrowing 8k doge using 10k doge as collateral.

Haha you are right and if they do, the lender should ask, are you okay? LoL .

Borrowing the same coin after putting the coin in collateral is like you ask someone to please hold his water bottle and then ask for a sip of water from the same bottle.

You could get USDT loan using doge as collateral and buy more doge with this usdt and earn on pomp but again... You are not earning on loan here. You earn thanks to your decision to invest USDT into DOGE. You earn because you exposed your money to currency risk and not by borrowing money.

I will try and simplify for people who are still confused. Let's consider an example:

You had 10k doges and you took a loan of $400 (considering the market price was 5 cent per doge and usually 20% additional value of collateral is put to get loans, so you put $500 worth of collateral and took $400).

Now you get $400 from which you bought another 8k doges and the value of doge coin reaches from 5 cent to 8 cents, imagine. You sell the 8k doges and you get $640 if my maths is working fine.

Now you pay back your loan and you earned ($240 - interest) profit. That's how it goes.

[Mauser]

I think the main point behind collateralized loans is too make them cheaper. The interest rate is much lower if there a collateral behind the loan than if there isn't one. The borrowers incentive to default on a loan is much lower if he loses the collateral than otherwise. To be honest it is very hard to get a loan without collertal. Because even your monthly salary will be viewed as collateral by the lender.

[whyrqa]

At least everyone knows that a secured loan can be obtained without any problems, and in this situation, not only the lender, but also the borrower gets an advantage.
But I would like to point out the fact that banking institutions, without any particular fear, issue loans to people who can offer something valuable on collateral or provide a solvent guarantor.

[posi]

At least everyone knows that a secured loan can be obtained without any problems, and in this situation, not only the lender, but also the borrower gets an advantage.

The borrower and the lender always get advantages but the op doesn't understand the advantage of collateral loan aside the profit making it also give the borrower the chance to keep his precious holding while he borrows another particular he needed to trade or making an optimistic investment.

[chaoscoinz]

Let's say i have 1000 USDC

Step 1 i deposit it ( gas fee is taken + approve fee i think )
Step 2 i set it as collateral ( gas fee is taken )
Step 3 now i want to borrow 700 DAI ( APY 12.82% ),i click on it
Step 4 approve ( gas fee is taken )
Step 5 Around 650 DAI is sent to my address ... 50 usd lost in fees

What's the catch ? I just lost money... How can you make money from taking this type of loan ?

Disclaimer: "Not financial advice, just an opinion"

The voice of wisdom often falls upon deaf ears, but here goes nothing! Collateralized loans are good, simply because it provides the less fortunate who would otherwise be turned away, to acquire an easy low interest loan, at any given time, with no bank or centralized authority to cancel you out.
   On top of that, some loan platforms provide governance tokens (cryptocurrency), all you would have to do is put 2 + 2 together and profit.