Crypto loans are the new hype in the market. Why? Suppose you have your savings account at a bank. There is a good chance that you will earn abysmal interest rates. Most savings accounts today offer interest rates below 0.5% to their customers.
But imagine earning an annual percentage return 10 to 20 times what you are earning now. It would be excellent! With cryptocurrency lending platforms, such interest rates are possible. Plus, it doesn’t even require any exposure to risky assets like Bitcoins.
Browse this page to learn more about best crypto loans and how do they work.
What is crypto lending and how do crypto loans work?
Cryptocurrencies involve digital assets with various uses, including securing loans. you have crypto loans with collateral to get a loan, such as a car loan or mortgage. In such a loan, you get ownership of your cryptocurrencies while paying off your loan.
The collateral is valid so that when you don’t repay the loan, it offsets your collateral. However, you can only borrow up to 50% of your digital asset balance. But some cryptocurrency lending platforms would allow you to borrow up to 90% of your absolute value.
Depending on the platform you use, you can get your loan funds in US dollars or in cryptocurrencies. However, the types of cryptocurrencies to secure a loan would vary depending on the platform you are using. If you are not using the correct type of cryptocurrency, you must choose a different one to qualify.
Additionally, some platforms offer you non-custodial crypto that allows you to profit from your digital assets without trading. But they can still require collateral for you to be eligible.
What are the types of crypto loans?
There are two categories of crypto loans to make your selection easier. Here are the different categories of crypto loan.
Cryptographic Custodial Loans (CeFi)
Centralized financing loans (CeFi) are depositary loans that support your guarantees. For this type of crypto loan, you cannot access your secured assets. The lender is in full control of your aid.
Crypto loans on deposit can be easily accessible and within your means compared to traditional loans, as they still depend on centralized lenders to impose their terms.
Non-depository crypto loans (DeFi)
Decentralized Financial Loans (DeFi) are non-depository crypto loans. They rely on smart contracts rather than the central organization to implement their terms. The trader has control over his assets until he chooses to default on his loan.
In this type of crypto loan, you receive stablecoins instead of fiat currency. You can exchange stable coins for cash. DeFi loans have a relatively higher interest rate.
Best crypto loans
You jumped here to find the best cryptocurrency loans on the market, and below are some of the best crypto loan accounts you could find.
Ideal for DeFi loans: yearn.finance
The yearn.finance protocol decentralizes high interest loans. Instead of a third party, this platform operates independently using smart contracts. It offers a variety of products, the most popular of which are yearn and yEarn safes.
The Yearn token is the governance token for YFI holders to switch to smart contracts. YFI has appreciated over 4,000% and each token is trading around $ 34,000 today. This platform does not rely on collateral to set a bar on lending.
Additionally, the interest rate on your crypto is highly variable depending on the cryptocurrency you are using to fund the protocol. Usually, the platform offers a stable interest rate between 1.3% and 18.65%.
Best for beginners: BlockFi
BlockFi is a great platform to earn high interest on your savings account. You can use Bitcoin, Ethereum, Litecoin or stablecoins to fund your account. If you choose to invest with Bitcoins, you earn 6% APY for the first 2.5 BTC followed by 3% APY on any Bitcoin amount.
Litecoin and Ethereum offer 5% APY, and stablecoins contribute 8% to 9% annual interest rates. By using BlockFi, you can withdraw your crypto at any time. Each month you receive a free withdrawal with a nominal fee imposed on additional withdrawals.
You also get USD loans with BlockFi. However, for this type of loan, you need to use cryptocurrency as collateral. The amount of collateral would affect the rate of the loan. The loan rate varies from 4.5% to 9.75%. There is no limit to the maximum loan amount.
Best for the crypto variety: Celsius
Celsius was able to process $ 8.2 billion in loans from 340,000 clients. It has been subject to asset verification and as a result is a trustworthy platform. You have a lot of cryptocurrency options with Celsius to fund your savings account. Celsius and BlockFi have the exact deals in terms of APYs using Bitcoin and Ethereum.
In addition, Celsius has better competitive deals with APY using stable coins. They offer a staggering 13.86% APY for the Tether, USDC, TUSD and GUSD. All of these options are for stable coins. Additionally, BlockFi and Celsius are similar in offering user loans with a minimum of $ 500.
There is no limit for the maximum loan amounts, but you must complete a proportional amount of crypto to be eligible for the same. Usually the interest rate with Celsius ranges between 3.2% and 21.49%.
Best for minors: Helio Lending
Helio allows miners to take advantage of current cash flow. You can use the money to reinvest in mining. It is indeed a great platform to leverage your digital assets in exchange for short-term money. It is also simple and easy to administer, and the lender provides you with all the necessary details.
The platform offers a loan to value ratio of 40% to 70%. Your APR depends on the loan to value ratio. They also give you a flexible choice to pay off your loan, including full repayment or interest-only options.
You also don’t have to worry about margins and secure your digital assets that remain in cold storage.
Benefits of cryptocurrency lending
- Quick financing: Loans, once approved, only take a few hours to transfer to your account.
- No credit check: Typically, crypto lending platforms do not perform credit checks, which is ideal for people with bad credit.
- Low interest rates: Crypto loans are inexpensive compared to personal loans and credit cards.
- Loan amount based on asset value: You can borrow up to 50% of your asset value, while some trade up to 90%.
- Possibility of lending cryptos: Crypto exchanges offer interest accounts that allow you to lend digital assets and receive a high APY.
You will get various options to choose your lending platform. You would even have the option of opening a savings account using crypto, trading tokens, etc. With the two categories of lending platforms, it is clear that it is crucial to do.
There is room for growth, and being a seeker of the best crypto loans certainly puts you in the area of potential benefit claimant without the usual formalities.