Earlier protocols like Aave and Compound required significant overcollateralization, typically 150% or more of the loan value, creating capital inefficiency and severely limiting access.

By replacing collateral requirements with creditworthiness assessments, TrueFi unlocks capital that would otherwise remain dormant. Borrowers gain access based on their proven reliability rather than their ability to lock up existing assets, dramatically expanding the pool of potential participants.

For lenders, this approach translates into higher yield opportunities that better reflect true risk-adjusted returns from real-world lending situations. The economic impact is substantial: capital flows more efficiently throughout the system, powering productive lending activities rather than sitting idle as collateral.