With fiat loans, you can pretty much get free money without anything being taken from you right away. With DeFi loans, you pretty much have to give away the keys to your house if you want to use it as collateral (unless we’re talking flash loans which isn’t practical for anything but instant arbitrage). It’s like you can only get “loaned” a percentage of what you already had. It’s like you pretty much have to already have to assets to be loaned anything. With fiat loans, it seems like your credit score is what mostly constitutes your loan amount so I could only have pocket lint and still get maybe 5k cash and if I don’t pay, my credit score goes down and then I might actually have to give up my car which I don’t actually own all the way. Can someone explain what I’m missing? How’s it a loan if I can only pretty much be loaned what I already have and have to lock up what I offer as collateral. So now taking out a DeFi loan, I have less money to work with despite being paid some minimal interest to have collateral locked up. With DeFi, it’s like owning a house and bank giving you cash of 80% of your house but now you can’t use your house. where is the leverage?
Edit: I was trying to understand why there are no under-collateralized loans in DeFi? And why more don’t talk about or emphasize this being a benefit or setback? Is this a benefit or a setback? Does defi want under-collateralized loans or should it stay away from them?