I'm curious if you know what happens if there's a significant drawdown. Does one need to add more collateral to avoid partial liquidation? Guessing so, but never seen it addressed
Discussion
Yeah typically the lender wants you to maintain a certain LTV (typically ~50%) if that goes up they will probably ask you to add more collateral and when a threshold is met and no additional collateral is added they liquidate the collateral to protect the loan
Thanks, thought it was strange hadn't heard it addressed. Grace periods etc., don't really know how it all works. Prob worth educating people more about that imo
Yeah, it’s a pretty standard practice similar to trading on margin and needing to keep the margin maintenance at a certain level to avoid getting a margin call.
I imagine the user interface walks you through this when you take out a loan
Yes margin call at 70% LTV with 24 hrs to bring collateral up to 60% and 80% causes liquidation. It’s a bad idea.