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. Lygos Finance does not offer undercollateralized loans; its $25K–$100M loan principal is secured by Bitcoin collateral locked in 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.
Lygos Finance does not offer undercollateralized loans; its $25K–$100M loan principal is secured by Bitcoin collateral locked in 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.