What are collateralized loans and how do they work?

Can you imagine accessing funds without having to sell your investments in real estate? At Reental, we are committed to offering secure and optimized financing solutions, making the most of tokenized investment in real estate projects.

Do you want to know how you can maximize your returns, diversify your investments and keep your assets in the long term? As we already told you in the article”Tokenized Investment and Collateralized Loans“, collateralized loans are the key to achieving these objectives without complications.

Keep reading to discover how collateralized loans can transform your investment strategy and offer you unprecedented financial flexibility.

What is a collateralized loan?

It is a type of loan for which the applicant leaves as collateral an asset in their possession as security to obtain financing. This means that the borrower must offer an asset or asset to access and obtain the loan. In our case, collateralization will allow you to use your real estate tokens from certain projects as collateral to obtain loans.

Imagine that you have tokens from a real estate property in Reental. Instead of selling these tokens for liquidity, you can use them as collateral to obtain a loan. This allows you to access funds without having to part with your shares, keeping your investments in the long term and using capital to generate additional income.

Benefits of Collateralized Loans

• Immediate Liquidity: One of the main benefits of collateralized lending is liquidity. By using your tokens as collateral, you can gain access to funds when you need them most without having to sell your shares. This is especially useful in emergency situations or when a new investment opportunity emerges.
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• Diversification of Investments: Using your tokens as collateral allows you to further diversify your investments. You can explore new opportunities in the DeFi (decentralized finance) ecosystem without getting rid of your real estate assets.
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• Performance Optimization: Maintain your investments for the long term while harnessing capital to generate additional income. This strategy allows you to maximize the returns on your initial investments.
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Types of collaterals

At Reental, we will use certain real estate tokens as collateral for loans. These tokens represent the value of the property of a property, making them a solid and reliable guarantee.

In addition to real estate, other assets such as stocks and cryptocurrencies can also be used as collateral on different financial platforms. These assets offer great flexibility and can be easily liquidated in the event of default.

How collateralized loans work

The process for obtaining a collateralized loan is generally simple and transparent. First, you must select the asset you want to use as collateral, whether it's real estate, stocks, cryptocurrency, or other valuable assets. Then, the value of the collateral is evaluated to determine the amount of loan you can obtain, in the case of Reental, each token gets the value of 100 $/€.

Once the value of the collateral has been defined, the lender will grant a loan for an amount lower than the value of the collateral, generally around 80%. If this loan is requested within the DeFi world (decentralized finance), smart contract technology will be used to keep everything recorded on the blockchain and funds are quickly disbursed, which can be used from investing in new projects to covering unforeseen expenses.

During the loan period, the collateral remains locked and cannot be sold or transferred until the loan is repaid. The borrower can repay the loan at their own pace, with the flexibility to decide how many payments to make, when and how often.

Use Cases for Collateralized Loans

Many investors use collateralized loans to access additional capital who then invest in new opportunities. This allows them to expand their investment portfolio without having to sell their current assets. Let's say you have tokens from a real estate project in Reental and a new investment opportunity emerges. Instead of selling your tokens, you can use them as collateral to obtain a loan and finance the new investment.

In emergency situations or incidentals, a collateralized loan can provide the necessary liquidity without having to part with your investments. It allows you to finance reforms without selling your shares in the project.

Collateralized loans allow investors take advantage of market opportunities quickly, without having to wait to liquidate other assets. This is especially useful in volatile markets where time is a critical factor.

Frequently Asked Questions

What is collateral in this type of credit?

Collateral is a valuable asset offered as security to secure the repayment of a loan. In the event of default, the lender can take possession of the collateral to recover the borrowed funds. In our case, precisely the tokens of the properties you own acting as collateral.

What Are Collateral Payments?

Collateral payments refer to the borrower's obligations to maintain the value of the collateral for the life of the loan. If the value of the collateral decreases, the borrower may need to provide additional collateral.

What is the benefit of collateralizing my tokens?

The possibility of investing without money thanks to the token guarantee. As a borrower, you can access indebtedness and thus obtain more capital to reinvest and your profitability to grow faster. In other words, you can invest money that has been lent to you in exchange for leaving your real estate tokens deposited as collateral.

How secure am I when leaving my tokens in deposit?

Your tokens will be deposited as security in a smart contract that only you have access to. Our contracts are also those of the Aave protocol, the world leader in this type of financial transactions, so the security of our contracts is the security of Aave.

Can I undo my loan and position at any time?

Yes. All you have to do is return the money you borrowed with the corresponding interest, thus unlocking your collateral.

How long will I be able to borrow and what type of rate will apply?

You can borrow up to 80% of your value in property tokens that you have left as collateral. Interest is always variable, depending on the liquidity available to be lent.

If I leave my tokens as collateral, who benefits from the returns generated by real estate?

You! The fact of leaving the tokens deposited as security does not prevent you from continuing to own them, so you will continue to receive the returns generated by the properties.

Conclusion

Collateralized loans are a powerful tool that allows investors to access liquidity without selling their shares, diversify their investments and optimize their returns. At Reental, we are committed to continuously offering solutions to market problems, without neglecting security and optimizing your profitability.

Not only does this allow you to keep your investments for the long term, but it also allows you to leverage capital to generate additional income and explore new opportunities in the DeFi ecosystem.