Stark Protocol enables everyone to borrow without any collateral. Undercollaterised lending is still needed to be solved in this Defi space. Some protocols try to provide it but they are unable to do it to their best extent as they only provide one solution to users. But Stark Protocol enables no collateral credit by combining multiple things like credit score and loans backed by your friend.
Like in Traditional Banking, in some situations a borrower needs someone(securer) to back the deal between the borrower and the bank, where if the borrower is unable to repay the credit to the bank, then the securer will have to pay the remaining about to the bank. With this situation we have created a system where when a user(borrower) wants to borrow the assets from the protocol but is not able to due to insufficient balance then he may request his friend to secure the loan. And if the securer accepts it, then his balance of the same amount as the Loan Amount will be locked in the protocol, and his friend will be able to borrow the assets from the protocol. Here are the following benefits of a Guaranty Backed Loan:- The Borrower will get the amount he needed with collateralizing. The Securer will earn greater interest by locking his amount in the protocol and can even get interested from the borrower if wanted. The protocol will earn the assets by implementing interest on the deal. Can pay this loan in installments for a specific period.
In the traditional market, where P2P loans also exist, we have made a functionality, P2P Lending, where the user can ask for a loan from the other user (with some interest on it if the lender implements it). Here are the following benefits of a P2P Loan:- The transaction will be P2P or between friends, so it will have some personal trust. The interest will be implemented only by the Lender, not the platform (at first). The platform will earn assets if the borrower extends the duration of the loan. Can pay this loan in installments for a specific period.
Both types of loans will maintain functionality to modify the Credit Score of the borrower so that in the future the lenders or friends can check out the risk factor by analyzing their Credit Score. The credit score will be modified after considering various factors like the number of installments used, the time period required in total, the previous history of the loans, etc.
And all the chat will happen on the platform only using the decentralized chat application where the user only needs to enter the address of their friend or the person from whom they want to request their guaranty or a loan.