Loans have changed. Sure, your bank still offers loans, but there is a new way to get a loan: crypto lending. What is a crypto loan? Let’s find out.
What Is a Crypto Loan and How Does It Work?
Crypto backed loans concept is pretty straightforward – customers are able to use their cryptocurrency as collateral to obtain fiat loans. The service has become very popular in the past few years as crypto holders tend to see their digital assets as the long-term investment rather than the immediate spending capital looking for ways to increase the productivity of their digital assets. Before crypto holders options were limited to either hold or trade. Crypto backed loans allow consumers to gain access to fiat liquidity while still keeping their digital currency.
When looking for the best loan terms keep in mind that the loan interest rate will depend on the LTV (loan to value which indicates how much cash you will get against your crypto pledge) ratio of the loan. Higher LTV would generally command higher interest rate but would provide more cash available. For example, with a 60% LTV a customer might see interest rates between 6% and 8%, but would only get 60% value of the pledged collateral given as cash, while with an 80% LTV the interest rates would be higher (up to 14%) but a customer would secure much more cash against the provided crypto pledge. With the average term of 12 months the higher LTV loans are usually more popular but a bit more difficult to find due to higher risk factors to lenders providing such loans.
If you pay off your loan in its entirety, you’ll receive your crypto back in return.
Reasons to Get a Crypto Loan
- No credit check. You don’t have to deal with a tedious credit check that punishes you for the past decisions you’ve made.
- Need money to trade. Investors need to make fast, decisive moves when making a trade. You can get a crypto loan to reinvest money back into your trading and make more money in the long-term.
- You need fiat. While crypto is a great investment, the world’s banking system relies on fiat currency. You won’t be able to make most of your purchases in crypto, so a loan is a good way to turn your crypto into cash that you can use to pay your bills.
- Emergencies. Many investments are great and can be turned into cash, but your investments will take time to be liquidated. When you have crypto as part of your investment portfolio, loans allow for immediate liquidation so that you can have fiat currency to pay emergency bills.When you need funds fast, you might not have to time to wait for a traditional lender. Crypto lending via crypto lending services allows for rapid funds to hit your bank account so that you can use your money immediately – no tedious approval processes required.
Bitcoin Loans vs Regular Loans
What is Bitcoin lending and how do these loans compete against traditional loans? Regular loans (you know, the standard loans with the rigorous approval process) are from traditional banks and take a while to be approved.
Your credit will be checked, and you’ll likely be asked to put up some form of collateral. Most individuals will have to put their homes or car titles up as collateral. However, there are cry
If you can’t pay your loan, you risk losing your collateral.
When it comes to crypto loans without collateral, while there may be some legitimate options available, the majority of offers of crypto loans without collateral are likely scams. Typically, lenders require collateral as a means of protecting themselves, so loans that appear too good to be true are often just that. Users should be careful when borrowing cryptocurrency from lenders who don't require collateral, as it could lead to financial loss or other risks.
Bitcoin loans are different because you’ll be able to avoid sky-high APR rates linked to your credit history
How to Borrow Bitcoin or Ethereum in 5 Simple Steps
1. Open an account with Nebeus – it’s fast, simple and takes just 2 minutes.
2. Choose the product you want to use. In this case, crypto-backed loans.
3. Choose between a Bitcoin or Ethereum loan, paying attention to the loan-to-value.
4. Receive an instant loan approval.
5. Transfer money to a credit or debit card.
It’s that simple to turn your digital currency into cash. You can use your funds for anything, whether it be a dream vacation, mortgage, car loan, medical bills or anything else you need cash for instead of crypto.
Crypto lending bridges the gap in lending and allows you to use Bitcoin or Ethereum to take out fiat currency that you can use at any retailer.
Can you lose money lending crypto?
Yes, it is possible to lose money when lending crypto via decentralized finance, just as with any other investment. Lending crypto involves the risk that the borrower will default on the loan, or that the value of the crypto being lent will decrease in value during the loan period. It's important to carefully consider the risks and rewards of any lending opportunity before making an investment.
Can you make money lending crypto?
Yes, it is possible to make money when lending crypto via decentralized finance, although the potential returns will depend on a variety of factors such as the crypto interest rates offered, the crypto lending platforms used, and the overall market conditions. Some investors have found success in earning interest on their crypto holdings when they lend crypto out to borrowers, while others have found more success in other forms of investment.
Which crypto lending platforms are best?
The best crypto lending platforms for you will depend on your specific needs and goals as an investor. Some popular crypto lending platforms include BlockFi, Celsius, and Nexo, which offer competitive crypto interest rates and a variety of options when you lend crypto. Before choosing crypto lending platforms, be sure to conduct thorough research and analysis to ensure that it meets your needs and offers the appropriate level of security.
Are crypto loans worth it?
Crypto loans can be worth it for some investors, as they offer an opportunity to earn interest on their crypto holdings or access liquidity without selling their crypto. However, as with any investment, there are risks involved, such as the potential for default or the risk of loss due to market volatility. It's important to carefully consider these risks and conduct thorough research before making any investment decisions.
You can sign up for a Nebeus Account and bridge your crypto and cash.
La inversión en criptoactivos no está regulada, puede no ser adecuada para inversores minoristas y se puede perder la totalidad del monto invertido.