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Over-Collateralized Loans: The Standard Model
Over-collateralized loans are a cornerstone of traditional and decentralized finance. In this model, borrowers pledge assets worth more than the loan amount, providing a safety net for lenders. This excess collateral reduces default risk and ensures lenders can recover losses in case of non-payment. It's a tried-and-true method that balances risk and reward, making it a popular choice across financial markets.
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