With Under-Collateralized Loans, Hashstack is Shifting the TradFi and DeFi Paradigms

HashStack wants to change the traditional finance (TradFi) and decentralized finance (DeFi) ecosystems by making under-collateralized loans available to the unbanked and underbanked.

Financial Inclusion with HashStack

Most people are currently unable to obtain loans in the conventional finance (TradFi) system, as a large section of the world population (more than one billion people) does not match the criteria for obtaining loans in the centralized credit market.

In the TradFi world, for a user to acquire a loan, the financial institution will need to do a thorough check on their credit score to identify their collateral, and if the result is unacceptable, the applicant’s request will be rejected.

While decentralized finance (DeFi) has made life easier for the masses by making loans more accessible to users, without long loan processing delays or ludicrous credit checks to assess an applicant’s eligibility, loan over-collateralization remains a big problem in this trustless system.

For the uninitiated, loan over-collateralization implies putting up a sum that is significantly greater than the loan value. As a sort of security, most lending sites use this technique.

Though over-collateralized loans help maintain a trustless system and make it more difficult for borrowers to default, they are inefficient because they do not reach a large portion of the target audience – the underbanked and unbanked who are supposed to be the primary beneficiaries of decentralized finance.

It’s worth noting that DeFi’s main goal is to give people another way to get loans without meeting stringent conditions or going through extensive examinations. However, the high collateral-to-loan ratio in this industry’s lending market defeats this goal.

Because of the huge demand for crypto collateral, some people find it difficult to obtain large loans, which is a key weakness of DeFi.

The over-collateralized loan structure targets high-end borrowers. What about the average borrowers who are meant to benefit from the system?

Many borrowers cannot obtain DeFi loans due to the over-collateralization of digital assets, which hampered the industry’s growth.

Lowering collateral requirements is one method to make DeFi loans more available to a wider audience. Everyone will have a level playing field in this manner.

To gain global adoption in the crypto and DeFi industries, a viable alternative to over-collateralized loans must be provided, which is where under-collateralized loans come in.

Hashstack Under-collateralized Lending’s Future

Loans that are under-collateralized are partially collateralized. This indicates that the collateral offered does not completely cover the debt secured by the borrower.

If a borrower defaults, the platform will look for other ways to reduce risk or recover monies. In addition, borrowers benefit from under-collateralized loans since they are more convenient and lower the barrier to entry into DeFi.

On a worldwide scale, however, there are far fewer under-collateralized lending platforms than their over-collateralized counterparts.

Hashstack, a DeFi lending protocol, has seized the bull by the horns and created an entirely new experience for DeFi market participants with its revolutionary under-collateralized lending solution.

Hashstack is the world’s first self-driving DeFi lending solution. Hashstack customers can take advantage of non-custodial, under-collateralized loans with a collateral-to-loan ratio of up to 1:3.

In other words, a borrower can get a loan worth up to 300 percent of their collateral, allowing anyone to get capital loans for large projects at any time.

The introduction of platforms like Hashstack is a significant signal that the DeFi sector is expanding and poised to replace traditional finance by providing access to loans and other financial services that centralized banking makes inaccessible to many individuals.

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