Pillar Finance Docs
  • PILLAR FINANCE
    • Overview
    • 👍Challenges
    • Why PillarFi
  • WORK AND MECHANISM
    • đź“‘Borrowers Onboarding Process
    • Lenders
    • Built-In Protections for Lenders
    • Mechanism
    • Autonomous Yield Agent (AYA)
    • Autonomous Lending Agent (ALA)
  • Loans
    • Collateralized Loans
      • Features and Risks
      • Solution by PillarFi
    • Uncollateralized Loans
      • Features and Risks
      • Solution by PillarFi
  • REAL WORLD ASSETS
  • PILLAR TOKEN
  • USDY
  • KEY ADVANTAGES
Powered by GitBook
On this page
  1. Loans
  2. Collateralized Loans

Features and Risks

  1. Lower Interest Rates: Since the loan is secured by collateral, lenders often offer lower interest rates compared to uncollateralized loans.

  2. Higher Borrowing Limits: Borrowers can access larger loan amounts depending on the value of their collateral.

  3. Wide Range of Collateral Options: Assets like real estate, vehicles, and cryptocurrencies are commonly used as collateral.

  4. Reduced Lender Risk: The presence of collateral minimizes the lender’s risk, making these loans more accessible for borrowers with diverse credit histories.

Risks

  1. High Collateral Requirements: You often have to lock up more value than the loan itself. For example, putting up $150 worth of assets to borrow $100.

  2. Liquidation Risks: If your collateral loses value, the lender might automatically sell it to recover their money, causing you losses.

  3. Market Volatility: Fast-changing markets can make your collateral worth less, increasing the chance of liquidation.

  4. Limited Access: Not everyone has enough assets to provide as collateral.

PreviousCollateralized LoansNextSolution by PillarFi

Last updated 3 months ago