# The difference between holding value and borrowing it.

Canonical page: https://finanzer.ai/learn/asset-backed-credit

> An asset, a credit limit and a cash balance can all be expressed in money. They do different jobs. Here is how to read them before using asset-backed credit.

An asset, a credit limit and a cash balance can all be expressed in money. They do different jobs. Here is how to read them before using asset-backed credit.

## Four values that should stay separate.

A larger combined number can hide the obligation. Read the components instead.

| Value | Meaning |

| --- | --- |

| Cash balance | Money held in an account, subject to availability and account terms. |

| Pledged assets | Holdings committed as security for borrowing. |

| Available credit | The part of an agreed facility available to draw. |

| Outstanding debt | Borrowing already used and still to be repaid. |

## Spending changes the borrowing position.

A card purchase using the facility reduces available credit and increases the amount owed. Repayment reduces the debt; fees and interest are governed by the credit agreement.

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## The asset position can change too.

The agreement explains how collateral is valued and what coverage is required.

### Value changes

A fall in collateral value can affect the credit position even if spending has not changed.

### Coverage requirements

The agreement sets what must happen if required coverage is no longer met.

### Security enforcement

Pledged assets may be sold if the agreement’s requirements are not met.

## Before you decide.

### Do I sell the assets to use the card?

Eligible assets are pledged as collateral for credit. A purchase draws on that credit rather than requiring an upfront asset sale. You still owe what you borrow, and collateral can be sold if the agreement’s requirements are not met.

### Which assets can I use?

Collateral eligibility and valuation depend on the offer. Ask for the accepted asset list, how values are assessed and the conditions for adding or releasing collateral before committing.

### How much does borrowing cost?

Your offer sets the interest, fees and repayment requirements. Compare the total borrowing cost and card charges with the cashback you expect from eligible spending.

## Read the facility as well as the card.

Compare the eligible collateral, credit costs, repayment requirements and reward programme.

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