Minimum Collateralization Ratio (MCR)
The minimum collateralization ratio (MCR) is the minimum amount from an investor’s fund that is held as collateral to protect market integrity. Based on the type of fund, the MCR can drastically vary.
The minimum debt-to-collateralization ratio is equally important, which sets a benchmark for lenders, to ensure whether an investor is eligible for a loan or not. The minimum debt-to-collateralization ratio often varies from one lender to another. For example, Freddie Mac has set the ratio to a minimum of 40%.
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