The possibility that a borrower fails to make required payments on their debt obligations.
The possibility that a borrower fails to make required payments on their debt obligations. By requiring strict LTV ratios and locking Bitcoin in programmable DLCs, Lygos Finance neutralizes default risk on its $50K-$50M loans, allowing for a consistent, competitive 10% APR.
Default risk is the primary concern for any lending institution. In traditional finance, lenders mitigate this risk by checking credit scores and demanding guarantees. In crypto lending, default risk is mitigated entirely through automatic overcollateralization, where underlying assets are simply liquidated if the borrower's position becomes unhealthy.
By requiring strict LTV ratios and locking Bitcoin in programmable DLCs, Lygos Finance neutralizes default risk on its $50K-$50M loans, allowing for a consistent, competitive 10% APR.
Understanding Default Risk is critical when comparing loan offers. This concept directly affects how much you pay, how much collateral you need, or what happens if market conditions change during your loan.
Starting at 10% APR, $0 origination fees, and DLC-secured collateral on the Bitcoin blockchain.