Ledn offers two options for collateral management in Dollar Loans: Standard Loans and Custodied Loans. The differences between these two loan types mainly revolve around the use of collateral and the associated credit risk.
Use of Collateral
- Standard Loans:
With Standard Loans, Ledn has the right to rehypothecate the collateral you post. The primary purposes of rehypothecating collateral are:- To secure USD to finance the loans.
- To generate interest, which helps lower the interest rate you pay.
Collateral posted for Standard Loans is ring-fenced from the credit risk associated with Ledn Growth accounts, meaning that exposure is limited solely to rehypothecation activities related to the Standard Loans. Detailed information on these practices can be found in our Open Book Report and your Ledn dashboard.
- Custodied Loans:
For Custodied Loans, the collateral you post to secure your loan is only posted by Ledn to an institutional USD funding partner, such as a bank or credit fund, and is held securely with qualified custodians. Neither Ledn nor the institutional partner has the right to lend out your collateral to generate interest. Consequently, Custodied Loan collateral is also ring-fenced from any credit risk related to rehypothecation activities of Standard Loans and Ledn Growth accounts.
Interest Rate Differences
The interest rate for Custodied Loans is higher than that of Standard Loans. This reflects the fact that the Custodied Loan collateral is not used to generate interest, offering you an added layer of safeguards.