3 ms·

Why would a lender want to do any less due diligence if your downpayment was in crypto vs cash or gold or bonds or similar?

rglullis 4y ago
Because the risk of default (assuming contracts used are correct and safe) is smaller or zero
- majormajor 4y ago
  What? Why? We're talking about taking out a loan where you don't have 100% of the amount in advance. You could lose your job, your business could go south, you could ditch for another country and never use whatever bank account or wallet you had your downpayment in again, all those things that are basically currency-independent. Breaking a contract is a people issue, turning paperwork into "smart" code doesn't actually tie a chain around someone's ankle, and it certainly doesn't guarantee their future income.
  - rglullis 4y ago
    > where you don't have 100% of the amount in advance. This is not what I said. Willing to put 80% on down payment does not mean not having ways to pay things in full. - You might have the cash, but not interested in becoming totally illiquid. - You might be interested in getting a mortgage for the tax deductions. - You might have only the cash the downpayment, but use another property that you already own as collateral. - You might have only the cash for the downpayment, but you are going to buy the house to rent it. Point is, with "traditional" finance, you can only do these things if you are negotiating the whole package with the same bank, and this is how they "get" you. If people could actually manage their own wealth, there would be no strings attached. And let's not even get into the other kinds of issues such as bank's "rules" that seem totally reasonable but end up making the life of marginalized groups more difficult.
    - majormajor 4y ago
      Ok, so a secured loan? Those exist, sure. What does crypto get you in most of those cases? In the "all I've got is a million bucks in gold I stole from a vault and can't show a paper trail" case: I don't care. Not a valuable use case for me. That reason alone doesn't move the needle on crypto for me. In other cases: seems like you're gonna have an easy time getting a loan. lending to people who don't need it is the easiest sort of loan to make. (In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway...) Edit: you added something about how with traditional banks you have to do it all-or-nothing with a single bank and that's how they "get" you. I'm not sure how anyone's being "gotten," especially in recent times where rate competition has resulted in cheaper money than ever before. But it's also not true in most of the cases you outlined. If you have multiple sorts of assets that you want to borrow against instead of securing the loan with the property itself, you can take out a bunch of other loans on those other assets and pay cash for the property. Then you bring up historically marginalized communities and such... If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank... that would be a different convo, but "additional ways for people with assets to borrow money" doesn't sound so interesting, as it is.
      - rglullis 4y ago
        Sorry, I was in the middle in the edit and I think I ended up sort-of responding to this comment. > What does crypto get you in most of those cases? Speed and reduced operational costs, for one. If I wanted, I could get a collaterized loan on DeFI and have the money on my bank account faster than it would take me to fill the bank load application form. Most importantly, it gets disintermediation: a bank might be interested in selling a loan if it has some level of profitability. In DeFI, anyone can be a bank, so the market tends to be a lot more open and competitive. > In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway... Because, e.g, you've done the math and you realized that you don't want to pay more interested that is needed? > If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank Sure: https://trustlines.network/ https://trustlines.network/ TL;DR: it's a system where people can create distributed credit lines, local currencies (for use in impoverished communities that have no money but still need to have a credit rating mechanism) and so on. People could do this with community banks and credit co-ops, but it would be extremely difficult to have, e.g, such a system being capitalized by someone outside of the community. With Trustlines, you can have people in rich countries contributing for the system without middlemen like in a standard micro-credit alternative.

rglullis 4y ago

Because the risk of default (assuming contracts used are correct and safe) is smaller or zero

majormajor 4y ago
What? Why? We're talking about taking out a loan where you don't have 100% of the amount in advance. You could lose your job, your business could go south, you could ditch for another country and never use whatever bank account or wallet you had your downpayment in again, all those things that are basically currency-independent. Breaking a contract is a people issue, turning paperwork into "smart" code doesn't actually tie a chain around someone's ankle, and it certainly doesn't guarantee their future income.
- rglullis 4y ago
  > where you don't have 100% of the amount in advance. This is not what I said. Willing to put 80% on down payment does not mean not having ways to pay things in full. - You might have the cash, but not interested in becoming totally illiquid. - You might be interested in getting a mortgage for the tax deductions. - You might have only the cash the downpayment, but use another property that you already own as collateral. - You might have only the cash for the downpayment, but you are going to buy the house to rent it. Point is, with "traditional" finance, you can only do these things if you are negotiating the whole package with the same bank, and this is how they "get" you. If people could actually manage their own wealth, there would be no strings attached. And let's not even get into the other kinds of issues such as bank's "rules" that seem totally reasonable but end up making the life of marginalized groups more difficult.
  - majormajor 4y ago
    Ok, so a secured loan? Those exist, sure. What does crypto get you in most of those cases? In the "all I've got is a million bucks in gold I stole from a vault and can't show a paper trail" case: I don't care. Not a valuable use case for me. That reason alone doesn't move the needle on crypto for me. In other cases: seems like you're gonna have an easy time getting a loan. lending to people who don't need it is the easiest sort of loan to make. (In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway...) Edit: you added something about how with traditional banks you have to do it all-or-nothing with a single bank and that's how they "get" you. I'm not sure how anyone's being "gotten," especially in recent times where rate competition has resulted in cheaper money than ever before. But it's also not true in most of the cases you outlined. If you have multiple sorts of assets that you want to borrow against instead of securing the loan with the property itself, you can take out a bunch of other loans on those other assets and pay cash for the property. Then you bring up historically marginalized communities and such... If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank... that would be a different convo, but "additional ways for people with assets to borrow money" doesn't sound so interesting, as it is.
    - rglullis 4y ago
      Sorry, I was in the middle in the edit and I think I ended up sort-of responding to this comment. > What does crypto get you in most of those cases? Speed and reduced operational costs, for one. If I wanted, I could get a collaterized loan on DeFI and have the money on my bank account faster than it would take me to fill the bank load application form. Most importantly, it gets disintermediation: a bank might be interested in selling a loan if it has some level of profitability. In DeFI, anyone can be a bank, so the market tends to be a lot more open and competitive. > In most of these cases, e.g. multiple properties or non-liquid assets, I'm not sure why I want to put down more collateral anyway... Because, e.g, you've done the math and you realized that you don't want to pay more interested that is needed? > If you could sell me on the benefits for most of the folks in the world, people who may only have 5% down compared to a traditional bank Sure: https://trustlines.network/ https://trustlines.network/ TL;DR: it's a system where people can create distributed credit lines, local currencies (for use in impoverished communities that have no money but still need to have a credit rating mechanism) and so on. People could do this with community banks and credit co-ops, but it would be extremely difficult to have, e.g, such a system being capitalized by someone outside of the community. With Trustlines, you can have people in rich countries contributing for the system without middlemen like in a standard micro-credit alternative.