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We'll be honest... this is an area crypto is still growing in but nonetheless... Yes! You can get a crypto backed loan.. Today!
Note: These are overcollateralized loans meaning you're borrowing less than the value of your crypto
Lets say you saved up $60,000 and bought yourself 1 Bitcoin which is sitting in your wallet earning some interest (lets say 5% a year) but an unexpected bill comes up and you need $10,000... but you don't want to sell your bitcoin because you believe its going to the moon!
A crypto backed loan is your answer!
With this loan, you get to borrow $10,000 against your crypto. You don't have to sell your bitcoin and it stays fully in your possession! So that you don't miss out on its path to the moon!
(Quick Note: A common type of crypto loan is a "margin" loan associated with margin trading. That is a bit more complex and we won't talk about that here.)
Find your crypto backed loan provider!
Why not use all 3 services from one crypto provider? Its kinda like having a crypto "bank" isn't it?
There are a number of providers out there which include:
They can be your crypto wallet and your savings account and your lender all in one as they allow you to.
Wallet Service: receive crypto from or send crypto to other addresses and
Savings Account: earn interest on your crypto when its stored with them and
Loan Provider: borrow against your own crypto (receiving cash or crypto)
Understand interest rates and deposit your crypto to the address specified by the loan provider
You should shop around for the best borrowing rates just like you would do with a regular loan
1. Just like with banks, different providers have different borrowing interest rates and these interest rates change over time based on supply and demand. We see interest rates between 6% APY and 12% APY.
2. Once you've understood the interest rates then...
Choose the crypto you want to deposit and
Copy the receive address for the specific crypto you want to deposit from the loan provider. Please see our "Send or Receive Crypto" page for guidelines on sending and receiving crypto.
The crypto you send to the loan provider serves as collateral for the loan.
Determine your borrowing amount, select currency (Cash or Crytpo) and Borrow
Don't borrow the max amount offered. It increases your chances of auto liquidation
The loan provider will have a maximum amount loan that you can borrow which is simply based on the amount of collateral that you deposit.
E.g. if you deposit $100 the maximum amount you can borrow may be $50
Important Note on Automatic Liquidations
Loan providers will monitor the value of the loan to the value of your crypto over time. For example if the value of your crypto is $100 and the value of your loan is $10, this ratio is 10%
The loan provider sets a limit e.g. 95% meaning that if the value of your loan exceeds 95% of your crypto value they will automatically begin to sell your crypto and repay the loan to keep that ration below 95%.
This is their way of preventing default. Because the price of crypto fluctuates significantly, you will need make sure your ratio never gets too close to the liquidation percentage.
Receive your funds and monitor price changes to your collateral
The loan provider will deposit the requested funds at the address you designate. Please see our "Send or Receive Crypto" page for guidelines on sending and receiving crypto.
As mentioned above loan providers will monitor the value of the loan to the value of your crypto over time. Drastic changes to the price of your underlying collateral will lead to auto liquidation.
Although platforms will send some form of notification (e.g. email or text) as you approach auto liquidation, its important to independently monitor the price of your underlying asset so that you do not get auto liquidated.
If the price of your underlying asset drops and you are close to liquidation you can either add more collateral or pay back some portion of the loan push you further away from liquidation