I used to assume a fixed-rate loan only had one ending: wait till maturity, repay the full amount, done.
Then I came across something interesting on #TermMax
Before maturity, the FT — the token that represents the debt — can trade below its face value on the open market. So a borrower isn't necessarily stuck with just one option:
Wait it out and repay in full.
Or buy back the FT at a discount and use it to settle the same debt for less.
Both paths release the collateral the same way. The only thing that changes is the cost.
Say the FT is trading at $0.80 on the dollar. If there's enough liquidity, buying it back and using it to settle the debt could cost quite a bit less than repaying at face value.
But there's a catch.
That discount only matters if you can actually get it. You need enough sellers, a reasonable spread, and low enough gas for the savings to survive execution.
So the real question isn't whether this feature exists.
It's how often the market actually gives borrowers a good enough discount to make early repayment worth it.
#TermMax @TermMax
Then I came across something interesting on #TermMax
Before maturity, the FT — the token that represents the debt — can trade below its face value on the open market. So a borrower isn't necessarily stuck with just one option:
Wait it out and repay in full.
Or buy back the FT at a discount and use it to settle the same debt for less.
Both paths release the collateral the same way. The only thing that changes is the cost.
Say the FT is trading at $0.80 on the dollar. If there's enough liquidity, buying it back and using it to settle the debt could cost quite a bit less than repaying at face value.
But there's a catch.
That discount only matters if you can actually get it. You need enough sellers, a reasonable spread, and low enough gas for the savings to survive execution.
So the real question isn't whether this feature exists.
It's how often the market actually gives borrowers a good enough discount to make early repayment worth it.
#TermMax @TermMax
