A car or a house being used as collateral are kept by the borrower at their disposal. This means the borrower can benefit from the collateral asset, e.g. by using it or living in it, while the debt still hasn't been paid off. In these cases a fully colletarelised loan can make sense. But this is not the kind of collateral that we're talking about here. We're talking about collateral that is held by the lender in a margin account, or "locked" (in defi parlance), until the debt is paid off, which is the only kind of collateral that can be used in "decentralised finance", because the other type requires a contract (not a smart contract, an actual, legal contract) and the ability to litigate.

Which is why car loan providers usually require a substantial down payment so the loan is not underwater. (And why home mortgage providers usually require a LTV well under 100 percent--and make you pay mortgage insurance even then unless the LTV is even lower.)

What the hell are you taking about? I have never made a down payment for a car and have never paid interest on a car loan. Ever. And I’ve purchased many cars.

E: woah! .06 seconds to the first downvote to a Dow thread comment on a two day old post! I’m out.

Currently several year-old cars are selling for nearly as much as brand-new cars. Even before the current car shortage, repossessed zero-money-down cars were commonly resold at basically the same price as the first sale.

Currently. Which is mostly notable because it is not normal.