Want to borrow a few Bitcoins, or have some spare cryptocurrency? In both cases, you might be interested in finding a reliable crypto lending platform. They provide the opportunity to get a loan with Bitcoin without visiting banks or meeting with other BTC holders. However, when it comes to the financial sphere and cryptocurrency, cybercriminals don’t miss the opportunity to make their money, so there’s a huge amount of scams.
In this article, we will review the best crypto lending platforms and websites. Let’s go!
What Is a Crypto Lending Platform?
Crypto lending is the process of borrowing a certain amount of cryptocurrency either directly from a certain person, or from a lending platform, as simple as that. It allows traders to start their business without the need to buy or mine crypto themselves, while letting crypto hodlers earn interest on their existing funds, making extra crypto without having to mine or trade. As with real-life lending, crypto lending platforms charge interest for their services.
How do traditional loans work? You deposit your fiat currency to a savings account, and the bank lends those funds out to borrowers. The bank then later pays you interest on the fiat currencies or other assets you have in your savings accounts. Cryptocurrency loans work in a very similar way, but eliminate the need of having to worry about your funds being paid back (and, in many cases, offer much more favorable interest rates). The best crypto lending platforms can be considered to be on par with, if not better than, traditional banks when it comes to loans.
Most crypto loans are collateralized, but it’s also possible to borrow crypto on a (centralized) Bitcoin lending platform without collateral. Here’s how you can do it:
- You register on the platform and go through the verification process
- After that, upload your personal information and your business plan if you have one
- The business plan (if you have one) goes public, where each potential investor can evaluate it and decide if he or she wants to lend you their crypto
To assess the reliability of the borrower and the depositor, such platforms apply the rating system. It’s based on the information collected and the quality of the proposed purpose of the loan. If you have borrowed money and paid it back in time, you will have an excellent credit history and new investors will accept you. It’s a very convenient option for getting Bitcoin loans without collateral.
What Do You Need to Take Out a Crypto Loan?
Borrowing funds on a crypto lending platform is way easier than taking out a loan in a bank. For starters, in most cases, there are no traditional credit checks, which already eliminates the biggest difficulty that is usually associated with borrowing money. Moreover, if you borrow money from a DeFi platform, you won’t even have to pass the KYC verification.
Read also: 5 Facts DeFi investor should know
What Are the Risks Involved in Crypto Loans?
Since the crypto world is a rather risky place, crypto lending also has its own set of dangers that you should look out for.
- The legal side of the lending. Cryptocurrency and associated businesses don’t have a uniform legal framework. There are almost no laws controlling it and in some countries, financial operations with crypto, lending included, are outlawed. So study the laws carefully and operate within regulations.
- Different lending platforms have different fees and interest rates, so you can accidentally lend crypto from a platform with really high rates that are set on a daily basis. You can lose your entire trading profit (and maybe even more) to pay this platform off.
- The high volatility of the crypto market means that you can receive a margin call when you least expect it. Be sure that you are prepared for any unexpected price movements.
There are not that many risks that are specifically associated with crypto lending, so as long you stay aware and be careful, you should be fine.
Pros and Cons of Bitcoin Lending Platforms
Are Bitcoin and crypto loans worth it? It’s up to you to decide.
|Pretty urgent issuing. On some websites, there’s a possibility of getting individual loan conditions.||You need to provide strong evidence of your ability to repay the debt. User reputation matters a lot.|
|The interest rate on English services is pretty low (less than 10%).||Most of the largest sites are in English, and other languages are hardly supported. Therefore, without communicating in English, it is almost impossible to get a loan.|
|The investor gets excellent earning opportunities if he selects reliable clients.||High volatility can put you in a tricky position. Say, you borrowed 1 Bitcoin for 8,000 dollars, and sometime later you will have to return 1 BTC that costs $10.000. Yet, during the bear falling market, you can return even less than borrowed (though the interest will be quite high). The time span of loans is not usually long enough to earn on it.|
|The resulting capital easily turns around. You can immediately transfer funds to an exchange account. And if you have a positive experience in trading, you can withdraw the credit quickly, and then work on your profits.|
|Higher amounts are transferred faster than through traditional means. And the fees for such transactions are much lower.|
How Are Crypto Loans Taxed?
The taxation laws surrounding crypto and cryptocurrency loans vary rather wildly from country to country, so you should check the legislation of the one you’re a resident of.
How to Compare Crypto Lending Platforms
Before you start looking for a service that can help you to get a crypto loan or earn interest on your funds, think about what factors matter to you the most. Is it a low loan-to-value ratio? Are you willing to sacrifice a little bit of stability and perhaps even reliability for higher interest rates? Are low transaction fees, loan processing fees, and withdrawal fees important to you?
When creating a pool of possible crypto loan providers, it’s better to not even consider services that have a multitude of bad reviews or have a history of security breaches.
Crypto lending sites are usually compared by their loan repayment terms, LTV rates, the loan limit, minimum loan, and loan duration they offer, and so on.
Best Crypto Lending Platforms
When it comes to finding the best crypto lending platform, there is no universal solution – each platform has its pros and cons. Read the fine text before signing an agreement and always read customer reviews. This way, you eliminate the risk of losing more than you can get.
Decentralized finance (DeFi) crypto lending platforms allow you to get crypto loans without having to go through the verification process and often have a higher annual percentage yield (APY) than centralized platforms. However, CeFi crypto loan providers are often much easier to use and are a lot less risky. The interest rates they offer may be lower, but they are a lot more stable.
The best crypto lending platforms are the ones that fit your requirements best, so it is really subjective. That said, here are the crypto lending platforms we would recommend above others.
Leading DeFi Lending Platforms
Aave is a successor to the ETHLend platform, and also allows crypto-backed loans, using the same LEND token to be utilized as the mechanism of trade where expenses can be decreased to 0.
The digital assets that are utilized as loan guarantees are put away in an open Ethereum blockchain to reach high system security with the utilization of a non-custodian depositary smart contract. Since the transaction is broadcasted on an open Ethereum blockchain record, the exchanges are straightforward and auditable by the public. Please note that Aave doesn’t have any collateral.
Oasis Borrow (MakerDAO)
Oasis Borrow is the crypto lending platform of the Maker ecosystem. Many users are attracted to this platform since it can basically offer you loans to yourself.
On Oasis Burrow, after putting an asset up as collateral, you have the option to choose between either minting a certain amount of the DAI stablecoin or paying back your loan to get back your asset. In essence, Oasis Burrow lets you borrow crypto that your collateral will be used to generate.
Oasis Burrow has a loan-to-value ratio of either 50% or 75%, and accounts that fall below the agreed-upon loan-to-value rate get automatically liquidated by the platform’s smart contracts technology.
Compound Finance is one of the best decentralized finance platforms that uses secured automated lending technology to offer its users quick and reliable crypto loans.
Compound has higher-than-average loan-to-value rates but, on the other hand, has no borrowing fees. Moreover, Compound Finance also has a lower liquidation threshold, which is very welcome when it comes to dealing with an asset as volatile as crypto. It liquidates only 50% of under-collateralized loans. Additionally, it has a fixed liquidation penalty of only 8%, compared to Maker’s penalty of 13% and more.
Leading CeFi Lending Platforms
Binance is one of the biggest cryptocurrency platforms in the world, so it isn’t a surprise that they offer crypto loans, too. Unlike many other platforms, they allow crypto hodlers to earn interest by lending their crypto to margin traders, instead of giving out loans themselves. The interest depends on the asset in question, with some going up to 15% annually.
They also offer crypto loans, though currently only USDT and BUSD are available. The interest rate on both starts at 8.90%, and their loan duration ranges from 7 to 90 days. Binance’s minimum loan amount is $1.
While Bitfines doesn’t call it as such, their Margin Funding feature is basically a lending service for margin traders. It allows traders to invest more in an asset for a fee of 15% flat for the usual deal, and 18% if the trade was opened with a hidden offer.
It should also be noted that if Bitfines takes over your positions with a sum exceeding $250,000, you will be charged a 5% fee for any losses incurred.
As one of the most popular cryptocurrency lending platforms, Poloniex offers a reliable and comfortable way to earn passive income. With a few features like “Auto-renew” and a user-friendly interface, it is a good platform for both beginner and experienced crypto hodlers to earn additional coins.
Is it profitable to lend cryptocurrency?
Lending out your digital assets can indeed be very profitable. The margin of profit that you will get depends on when, where, and what crypto asset you want to lend out. Crypto loans usually have higher interest rates than traditional savings accounts, but there are also more risks involved.
If you plan on holding your crypto for a long time, altcoin and Bitcoin lending can be a great way to earn interest on your funds and make some considerable passive income without having to pass strict credit checks.
Can you borrow against crypto?
Yes, Bitcoin lending sites offer you the option of borrowing fiat currencies, stablecoins, and sometimes other cryptocurrencies against crypto assets.
How does lending crypto make money?
Lending crypto lets you earn money the same way traditional loans do – you earn interest on the funds you do not plan to use at the moment.
There is a wide variety of different Bitcoin lending platforms out there that help you to earn interest on your digital assets in a quick and easy way. Look for the platform with the highest interest rates and the most favorable loan terms.
Some expert crypto traders also use crypto loans to short Bitcoin and other cryptocurrencies.
Is crypto lending safe?
Crypto lending platforms utilize the latest technology to make sure your funds will be safe. Reliable crypto loan platforms are as secure as most other online financial services.
Disclaimer: Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.
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