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> For home loans, the collateral is the house, which is strange because the house doesn't truly belong to the borrower until the loan is paid off. Your thinkin
by s1t5 6y ago
> For home loans, the collateral is the house, which is strange because the house doesn't truly belong to the borrower until the loan is paid off.
Your thinking is circular - the house doesn't truly belong to the borrower exactly because it's the collateral of the loan. Nothing strange about it.
- throwphoton 6y agoIt is the self-collateralization that is circular, not my thinking! Not all credit markets work like this; instead expecting as collateral something you actually own, and making margin calls when the value of that collateral falls.