If you have Bitcoins that you don’t want to sell, but you need other tokens, there’s a great way out — Bitcoin loans will bail you out. All you will have to do is leave a deposit in Bitcoins, and in return you will receive the currency you need, such as stablecoins. You can use these tokens in any way you want, even to withdraw them to an external wallet.
How to borrow against Bitcoin
To borrow the currency you need against Bitcoin, you only have to choose a reliable site. In order to get the required tokens, you don’t even have to register an account. In a few steps, you can get any number of stablecoins you need.
In order to do that, you will need to leave a certain amount of bitcoins as collateral. As a rule, the collateral exceeds the loan itself. The fact is that cryptocurrency lending platforms do not use the know-your-customer principle and do not require borrowers to provide personal information. Instead, borrowers provide a guarantee of loan repayment through the collateral, which exceeds the loan amount by about twice.
When you leave collateral on a cryptocurrency site, you can count on flexible liquidity. The loan-to-value (LTV) ratio for your collateral will range from 50 to 80% on average. So, as long as the collateral is on the crypto-platform, it will be dependent on exchange rate changes. After the loan is repaid with a fee, the collateral capital is returned to the borrower. This means that you’ll get the same amount of pledge as you left, and that way you can make a profit.
Keep in mind that each site has a critical value for the amount of collateral — the margin call. In this case, the site has the right to write off the entire margin. However, before your LTV level reaches the critical value, you will receive several warnings from the site where you borrowed the tokens, and you can increase the collateral word or incarnate the loan.
You can take any money under Bitcoin, whether it’s cryptocurrency or even fiat money. It all depends on the platform you choose. For example, you can get a cryptocurrency loan at Coin Rabbit — on this site you will have more than 137 options of currencies to borrow.
Collateral-free flash loans are also available to users and will need to be repaid within one block. This loan format is simple and automated and earns you money on held (HODL) crypto-assets or take advantage of lucrative loans.
Advantages of crypto-loan platforms
When it comes to collateral, it often seems strange to crypto-enthusiasts to take money at the expense of so much collateral. But crypto loans have many advantages:
- You take the money at a low annual interest rate — usually it’s about 10% or 17%;
- Despite the large amount of collateral, it is much more profitable to put your crypto-asset on a crypto-platform for a while than to sell it and lose potential profit along with it;
- You will have the opportunity to repay the loan in installments or even to repay it at any time that is convenient for you;
- Cryptocurrencies are available to anyone who can provide collateral or repay immediately in a flash loan. Borrowers do not need to have a solid credit history to acquire a Bitcoin loan, and it is easier than going to the traditional financial institution.
Types of Bitcoin Loans
Bitcoin loans offer access to funds without the hassle of traditional bank and credit lenders, allowing borrowers to take advantage of the digital currency’s speed, convenience, and low-cost. When taking out a loan in bitcoin, there are two primary types: secured and unsecured.
A secured loan requires the borrower to offer some form of collateral as reassurance that they will repay their loan correctly. If a borrower defaults on their payments, the lender is able to seize this property and recoup any lost funds. Some forms of acceptable collateral for a bitcoin loan include cryptocurrency assets such as another cryptos, tokens or altcoins, or even physical assets such as jewelry, cars or real estate.
An unsecured loan does not require collateral from the borrower; instead lenders issue these loans based on credit score and reputation. Unsecured loans may come with higher interest rates due to greater risk of default by borrowers; however it can be easier to acquire this type of loan than a secured one as it does not require any form of security back up from the borrower.
No matter how you obtain your bitcoins, make sure you understand how long you have before your repayment schedule begins and pay attention to interest rates over time since these may increase too without warning. By understanding your payments schedules beforehand it can help reduce any potential stress associated with repaying these loans in full so don’t forget to closely analyze all offers prior signing up for one!
Is it safe to borrow against Bitcoin
Although Bitcoin is a digital currency that has the potential for appreciation in value, it is also subject to large swings in price in either direction which increases the risk associated with investing in it. Finally, bitcoin lenders must also consider operational risks related to storing and exchanging bitcoins as well as possible security threats from hackers and other malicious actors who may attempt to gain access to their investments.
Finding a safe platform on which you can borrow against Bitcoin is quite easy, if you know what rules to follow. For example, CoinRabbit uses a system of cold wallets and thus provides the highest level of security. It usually takes no more than 10 minutes to get an instant BTC loan due to the lack of credit checks. All you have to do is wait for your bitcoin transaction to be confirmed. You will get a deposit immediately after repayment in a month, a year or more, as the repayment period on the site is unlimited.
Taking out a Bitcoin loan is a great option for hodlers who prefer to hold BTC rather than sell it. It is enough to choose a reliable site, leave Bitcoins as collateral and get a loan on favorable terms, which you can pay back at any moment.