Replying to Avatar David King

yup, over-collaterazlied loans help the lender manage risk against the typical downside volatility in the asset.

of course, over time I’d guess the volatility likely dampens and LTVs might go up, but that’s over the “years” timeframe
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symbsrcool 2y ago

And it also removes the need for a credit check of some kind and a way to recoup funds - I always thought that was the biggest reason for over collateralized loans

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David King 2y ago

It always comes back to managing risk and it’s a spectrum of risk/pricing of the loan. Credit checks help the lender lower risk by knowing more about to whom they’re lending and pricing it more appropriately for that assessed risk.