We’re investors in Centrifuge and have a few questions about how the protocol works. I work with a formal commercial lender who prepared these questions.
Hoping you can help me out.
1.) What happens when loans for real assets default? How does the asset get repossessed and then liquidated?
2.) If I make late payments or choose to default, what are the ramifications to me as a borrower? Does it impact a credit score or anything else that “sticks” with the borrower?
3.) How are the underwriters any better than the current banking system? Are they not just a centralized group of people making decisions?
4.) How does Centrifuge know an asset isn’t double-levered? E.g. I have a loan on my inventory to my commercial bank and a loan on the same inventory via Centrifuge?
5.) What’s the pricing on these Centrifuge loans?
a. If they are like other DeFi spaces, they will be very high. Since people can borrow against real world assets much cheaper, is it fair to say anyone using this platform will be someone that can’t get a loan in the current world? Therefore, Centrifuge’s pool of loans is very risky, is it not?
b. If there are mass defaults, underwrites will close up shop, correct? With no real world underwriter to take the risks, then Centrifuge fails, correct?
Apologies if these questions have been answered elsewhere. If so, it would be great if you could direct me to the answers.