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Credit Lines

SmartCredit.io Credit Lines are similar to TradFi Lines of Credit. Borrower’s collateralize their Credit Lines and can borrow again and again against their collateral.

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Key Takeaways

  • A SmartCredit.io Credit Line is a collateralized borrowing account that lets borrowers take multiple loans against the same collateral pool.
  • The first loan automatically creates the credit line; subsequent loans reuse it without additional gas for setup.
  • Borrowers can hold multiple loans and multiple collateral types within a single credit line.
  • Collateral is not re-hypothecated - it is locked in the smart contract and inaccessible to the platform.
  • There are four credit line types covering ERC20-ERC20, ERC20-ETH, ETH-ERC20, and ETH-ETH borrowing pairs.

Borrower specifies for their loan:

Concrete collateral ratio for the loan depends on the

  • loan term
  • borrowed asset
  • collateral asset
  • borrowers trust score.

Concrete interest rate for the loan depends on the:

  • loan term
  • borrowed asset
  • borrowers trust score (it's calculated automatically)

The system creates in the background always a credit line during the first loan. When borrowing a second time, the existing credit line is used.

The borrower can have different types of collateral in one credit line and multiple loans via their credit line. If the borrower’s loan is liquidated, then the remaining funds are transferred into the borrower’s credit line.

\ The borrower can:

  • Borrow again and again against unallocated collateral in the credit line.
  • Withdraw unallocated collateral (i.e., collateral that is not used for active loans) at any time.
  • Increase the collateral ratios of the active loans.
  • Add more collateral assets into their credit line.

Borrower needs to pay gas (ETH) for the transactions:

  • By the first loan for creating a credit line
  • By depositing collateral
  • By paying back the loan

If borrower has already collateral in the credit-line, then they can create new loan requests without the gas payment. In this scenario, they need to pay gas only by paying back the loan, which means significant gas savings for the borrower.

SmartCredit.io does not re-hypo the collateral. The collateral is locked in the credit lines; it’s “out of circulation”.

There are four types of credit lines:

  • ERC20-ERC20 is for borrowing ERC20 assets against ERC20 collateral.
  • ERC20-ETH is for borrowing ERC20 assets against ETH collateral.
  • ETH-ERC20 is for borrowing ETH against ERC20 collateral.
  • ETH-ETH is for borrowing ETH against ETH (in case someone wants to do this).

A credit line is always created with the first borrowing transaction and will be used in subsequent borrowing transactions. The assets in the credit line can be continuously re-used. It's like a collateralized line of credit in traditional finance.

Further info