All termsDeFi and RWA IntegrationWorth knowing
Undercollateralized Lending
Undercollateralized lending occurs when the value of collateral provided is lower than the amount borrowed, or when a loan relies substantially on the borrower's creditworthiness rather than sufficient collateral to cover the full obligation.
Why it matters to you
Much traditional business and private credit lending cannot work efficiently if borrowers must always provide more liquid collateral than the amount they borrow. Bringing this type of credit onchain therefore requires greater attention to underwriting, borrower quality, legal agreements and credit risk.
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