[hendzen]

Why would someone agree to take out a loan with a 6% interest rate when the fed funds rate (not incl spread for various retail products etc) is 400+ bps lower. Even with the spread you are going to be paying less than that for a regular margin loan for trading, which is what I assume these loans are used for.

[hnews_account_1]

Most people? Personal loan rates are closer to 7-8% on average I think. The fed funds rate is the very basic rate of economic activity. I mean, you obviously included the caveat about the spreads for retail products. What did you think those spreads looked like?

[hendzen]

The effective cost of borrowing is going to be considerably higher than 6% if a regular person is trying to pay for their living expenses with the principal of a loan denominated in cryptocurrency. Think about exchange fees, taxes for any appreciation/depreciation upon sale, the cost of tracking/filing the taxes etc.

As I said it seems like most of the DAI borrowing is being done by people taking out margin loans to speculate on crypto. Perhaps this might make sense for the limited use case of people trading cryptocurrency (which is its most popular yet pointless application), but I don't see it being useful or economically viable for general purpose loans.

EDIT: upon further thought since the loan has to be secured with crypto assets, its not comparable to a personal loan. The equivalent regular finance product would be for a portfolio line of credit. Those have much lower interest rates, fed funds + 1-3% depending on the source.

[hnews_account_1]

> The effective cost of borrowing is going to be considerably higher than 6% if a regular person is trying to pay for their living expenses with the principal of a loan denominated in cryptocurrency. Think about exchange fees, taxes for any appreciation/depreciation upon sale, the cost of tracking/filing the taxes etc.

I agree with that entire paragraph, so the rest of your comment is moot in terms of debate. However, I was just saying that on its face, 6% inside the USA is a good rate for loans.

[thedufer]

Personal loan rates aren't collateralized, which you're comparing with fully-collateralized loans. That's apples and oranges. Loans that are actually similar run <4%, not 7-8%.

[hnews_account_1]

Fair point.