What is excess collateral?
In the world of cryptocurrency lending and borrowing, the term "excess collateral" might be a new concept for many. However, it's an essential feature that can greatly benefit borrowers, especially those who opt for longer-term loans. In this article, we'll dive into what excess collateral is, how it works, and why it's a valuable tool for cryptocurrency borrowers.
Understanding Excess Collateral:
Excess collateral is a feature offered by Nebeus in specific situations where cryptocurrency prices experience significant increases, typically exceeding 10%. It is designed to provide borrowers with enhanced flexibility while maintaining the required level of loan security.
How It Works:
To activate the excess collateral feature, borrowers need to access their Nebeus app and enable the corresponding toggle. Once activated, the excess collateral feature comes into play when cryptocurrency prices surge by 10% or more.
Calculation:
Here's how the excess collateral is calculated:
When the cryptocurrency rate increases by 10% or more, Nebeus releases 6% of the collateral. In simpler terms, for every 10% increase in the cryptocurrency's value, 6% of the collateral is automatically released.
Benefits of Excess Collateral:
Enhanced Flexibility: Excess collateral allows borrowers to access a portion of their collateral when cryptocurrency prices rise significantly. This extra liquidity can be especially valuable if borrowers want to seize new investment opportunities or manage their finances more effectively.
Maintained Loan Security: Despite releasing a portion of the collateral, the excess collateral feature ensures that borrowers still maintain a sufficient level of collateral to secure their loan. This means that borrowers can enjoy the benefits of increased cryptocurrency values without risking the safety of their loan.
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