Liquidity Default
Given a scenario where a borrower fails to repay the loan plus interest at the end of the specified duration of the loan, including any potential loan extensions, the loan is classified as a default. During a default, a few different things happen.
- The liquidity pool is stabilized and receives additional liquidity from the Credit Default Protection Pool, this will help protect lenders and the health of the liquidity pool. The injected liquidity amount will equal the principal of the defaulted loan.
- The defaulted borrowers will be blocked from accessing any further loans on MoneySwitch and urged to repay an amount equal the principal of the defaulted loan plus interest into the Credit Default Protection Pool. If a borrower fails to repay a defaulted loan, legal actions will pursue in accordance with the framework loan agreement signed when initially on-boarded on MoneySwitch.
A defaulted borrower may resume borrowing on MoneySwitch conditional on repaying the principal and interest on the defaulted loan as well as community approval via the MoneySwitch DAO.
Last modified 4mo ago