A loan where the value of the pledged collateral is less than the total outstanding debt.
A loan where the value of the pledged collateral is less than the total outstanding debt. To maintain absolute systemic stability and guarantee its 10% APR yields, Lygos Finance strictly avoids undercollateralized loans, ensuring all $50K-$50M fiat payouts are backed securely by Bitcoin DLCs.
Undercollateralized loans heavily rely on borrower credit scores and legal recourse rather than asset backing. In traditional finance, credit cards and personal loans fall into this category. In DeFi, offering undercollateralized loans is incredibly difficult due to the pseudo-anonymous nature of users, making default risks exponentially higher.
To maintain absolute systemic stability and guarantee its 10% APR yields, Lygos Finance strictly avoids undercollateralized loans, ensuring all $50K-$50M fiat payouts are backed securely by Bitcoin DLCs.
Understanding Undercollateralized Loan 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.