– DeFi lending platforms allow anyone to become a crypto lender and borrower.
– Crypto loans are a great option for people who can’t get a traditional loan.
What Are Digital Asset Loans
Have you ever wanted to own a bank? Well, thanks to crypto and decentralized finance (DeFi), that opportunity is knocking on your door. You can now lend money to millions of strangers, just like a bank—and without all the typical red tape, thanks to DeFi!
Cryptocurrencies, like houses or stocks, are assets that can be used as collateral for a secured loan. A borrower can use cryptocurrency—whether it be Bitcoin, Ethereum, a stablecoin or another crypto—as collateral to borrow fiat money, such as U.S. Dollars or Euros.
Crypto Loan Investments
Cryptocurrency lending can generate passive income for the lender and provide the borrower with capital – which will hopefully lead to some profit too. In an ideal investment scenario, the lender will ultimately receive repayment of the loan plus interest and the borrower’s crypto that was used for the loan and collateral will have appreciated by the time the loan is paid off.
Crypto lenders typically provide loans with 50% loan-to-value (LTV), which means if the borrower wants a $100,000 loan she’ll need to put up $150,000 worth of collateral in cryptocurrency. Stablecoins generally have a more favorable LTV for the borrower, such as 80%-90%.
Uncollateralized crypto loans are uncommon and require the borrower to submit a loan application to verify identity and creditworthiness.
Most crypto lending platforms, like Nexo, offer numerous options, such as Bitcoin (BTC), Ethereum (ETH), USD Coin (USDC), Tether (USDT), Cosmos (ATOM), Polygon (MATIC), Binance Coin (BNB), among others. Crypto exchanges do not currently offer lending.
Decentralized Finance Crypto Loans
Crypto entrepreneurs and investors can become lenders if they use DeFi platforms like Compound Finance or Curve Finance. These companies allow users to manage their own crypto lending and borrowing portfolios via web3. Some crypto funds, such as Kingsly Digital Asset Fund, even specialize in DeFi and web3 investing.
Where to Get Crypto Loans
We use Nexo and YouHodler for crypto lending because they’re easy to use and have good rates. However, lending platforms are constantly changing their rates, so make sure you do some research to find the best rates.
Some of the best crypto and DeFi lending platforms are:
– Nexo
– YouHodler
– Compound Finance (DeFi)
– Curve Finance (DeFi)
– Aave (DeFi)
Crypto Loan Risks
Remember that cryptocurrencies are a volatile asset class. Borrowers and lenders can potentially lose their investments.
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