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Flash Loans has been around decentralized finance since last year – and made headlines due to the number of exploits in vulnerable decentralized finance protocols, including the margin trading protocol bZx.
What Are Regular Loans?
There are two types of loans that are typically disbursed in traditional finance, which include:
- Unsecured Loans
- Secured Loans
It is important to know what these types of loans are different from flash loans.
Unsecured loans are loans where collateral does not need to be put up to get a loan.
In other words, this means that there is not an asset you need the lender to have if you do not pay back the loan.
With unsecured loans, financial institutions rely on your financial trustworthiness – your credit score – to measure your ability to pay back the loan.
If your credit score meets the required threshold, the institution will hand you the money, but with a catch.
This catch is called an interest rate, where you will collect money today and pay back a high amount later.
If your credit is not up to par with the lender’s standards, you may have no choice but to get a secured loan.
In this case, you will need to …