There are two main differences to the client experience between Standard and Custodied Loans:
Use of Collateral
- With Standard Loans, Ledn has the right to rehypothecate the collateral that clients post. The primary use of the collateral is (1) to secure USD to finance the loans and (2) generate interest to lower the interest rate that our clients pay. Standard Loan collateral assets are ring-fenced from the credit risk associated with the Ledn Growth accounts, meaning that their exposure to credit risk is limited to the Standard Loan collateral rehypothecation activities. This information is available in our Open Book Report and will soon be available on your Ledn dashboard.
- With Custodied Loans, the collateral that clients post to secure their loan is only posted to an institutional USD funding partner, being a bank and/or credit fund, and such collateral is held in custody with qualified custodians and banks. Neither Ledn nor the institutional funding partner have the right to lend out collateral to institutions to generate interest. Therefore Custodied Loans collateral is ring-fenced from the credit risk associated with the rehypothecation activities related to Standard Loans and Ledn Growth accounts.
Interest Rate: The collateral posted for Custodied Loans is not lent out by Ledn to generate interest, and therefore the interest rate that clients pay for Custodied Loans will be higher than our Standard Loans.