Asset securitization is a financial instrument that converts various claims and assets, such as mortgages, car loans, credit card debts, etc., into securities and then sells them to investors. The application of this financial instrument helps reduce debt leverage, which is explained in three aspects below.

First, asset securitization can help banks and companies strip high-risk claims off their balance sheets to reduce their leverage. This approach can help them obtain financing more easily and improve their bond ratings, thereby lowering borrowing costs. In addition, by converting high-risk claims into lower-risk securities, banks and companies can also free up more funds to invest in other profitable areas of business.

Secondly, asset securitization can also help borrowers reduce their own leverage. For example, a borrower may have a home loan and a car loan that require higher monthly payments, increasing their debt pressure and leverage. However, by converting these claims into securitized products, borrowers can spread the repayment pressure and reduce leverage, making it easier to obtain higher credit ratings and lower borrowing costs.

Third, for investors, asset securitization is also an investment method that reduces risks and leverage. By investing in multiple asset securitization products, investors can diversify risks and reduce leverage, thereby reducing investment risks while ensuring returns. In addition, since asset securitization products are usually composed of multiple claims, even if one of the claims defaults, it will not have an excessive impact on the entire securitization product.

To sum up, asset securitization is a reliable financial tool for reducing leverage, which can help banks and companies release capital and reduce costs, help borrowers reduce repayment pressure and improve credit ratings. It is also an ideal choice for investors to diversify risks and reduce leverage.