Wouldn’t it be nice to further invest and grow your wealth without having to sell your assets on hand first?
Imagine Bitcoin keeps rising that you do not want to sell a single pennyworth of it, however, it’s that time to pay your bills.
We’re thrilled to announce our partnership with Lorlend protocol, the Best Rate Loan on the Binance Smart Chain, allowing you as a Twindex user who currently holds any tAsset to maximize your investment opportunities by lending your tAsset, whether it is TSLA, AAPL, FB, ARKK, XAU, or KUSD and borrow other assets to maximize your profits.
What Is Lombard Loan?
In general, a Lombard loan (or Multi-Purpose loan) is a kind of loan that is backed by assets, which for the purpose of the loan are called “collateral”. The role of collateral is to protect the creditor from risk — if you fail to repay the loan, your bank may sell/liquidate the assets to get the money back.
This mechanism is similar to the way your house acts as a guarantee for your mortgage, but in the case of the typical Lombard loans provided to private banking clients, the assets used as collateral are mostly liquid assets such as stocks, bonds, and other investments.
The name “Lombard” has the same origin as Lombardy, the region in northern Italy, whose people, the Lombards, were known as skilled bankers and lenders throughout Medieval Europe.
The Benefits of Lombard Loan
The key benefit of this type of loan is that the borrower retains all the related advantages of the assets. So the borrower does not need to reduce their capital — or their potential returns — to obtain cash.
With a Lombard loan, assets remain invested.
Imagine when you need a bigger amount to spend or pursue an upcoming investing opportunity, a Lombard loan can be a cost-effective and flexible financing solution. Even when you have high liquid wealth, selling your existing investments to get the cash you need may not be the best option for various reasons.
Instead of selling, you can use the assets as collateral for the Lombard loan. Flexibility is also one of the main benefits of Lombard loans. There is a selection of assets to choose from ranging from stablecoins to stocks.
Twindex x Lorlend — The First Lombard Loan on the DeFi Space
In traditional finance, the Lombard loan is considered to be a financial product that is reserved for high net worth clients only. As a contributor in the DeFi space for some time, one of our core values is to make financial services reachable and decentralized, therefore, we are the first in this industry to bring to you the Lombard Loan service. As mentioned above, Twindex users can lend various tAssets available on Twindex and some other stablecoins to Lorlend and borrow another asset to invest elsewhere.
Learn more about Lorlend: https://medium.com/@lorlendxtra/what-is-lorlend-af67829e1692
Who Is the Lombard Loan For?
If you expect that the stock you are buying will increase over time, you can simply mint tAsset from Twindex and lend it to Lorlend. Then, you will be able to borrow a specific amount of another asset to further invest in your choice and strategy.
In contrast, if you expect that the stock will decrease in value, for example, TSLA, you can lend any stablecoin and borrow TSLA from Lorlend and immediately sell it at the market price.
After that, if the value of TSLA does decrease to your target price, you can mint tTSLA from Twindex and return it to Lorlend to bring your stablecoin back and gain the difference of TSLA price.
The key prerequisite for taking out a Lombard loan is having some assets eligible as collateral. Usually, the market value of the assets needs to be higher than the loan amount, in order to provide a cushion for price fluctuations.
The key parameter that you will be watching carefully is the loan-to-value ratio or LTV.
The other key parameter is a “Liquidate by Time”. Using a Lombard Loan means accepting an obligation to repay a fixed amount of money at a fixed future date.
When taking out a Lombard loan, you should always keep the risks in mind, particularly when using the funds to buy additional investments. Leverage and flexible financing are a double-edged sword and asset prices can go either way.