Binance Tutorials
Collateralised Crypto Loans, Part One: The Basic Structure
Understand collateral, borrowed assets, interest and the point at which a loan becomes difficult to manage.
Understand the collateral
A collateralised loan involves an asset being pledged against borrowed funds. The collateral can fall in value while interest and other costs continue.
Watch the ratio
Loan-to-value or health metrics can change quickly when the market moves. A warning level is not the same as a guaranteed safety buffer.
Plan repayment first
Decide how the loan would be repaid if the original trade thesis fails. Borrowing to increase exposure can turn a market move into a forced sale.