Compare Crypto Loan Platforms for Borrowing Against Crypto 2023

  • January 25, 2023
  • 7 Min Read

Name
Editor's Pick
13.9%
-
-
-
13.9%
2.617%
-
-
Litecoin
LTC
13.9%
-
-
-
Chainlink
LINK
13.9%
6.249%
2.111%
-
USD Coin
USDC
13.9%
3.435%
3.144%
-
TrueUSD
TUSD
13.9%
3.378%
2.72%
-
Tether
USDT
13.9%
3.81%
3.792%
-
Dai
DAI
13.9%
3.153%
3.159%
-
Pax Gold
PAXG
13.9%
-
-
-
Pax Dollar
PAX
13.9%
-
2.827%
-

Key Takeaways:

  • Crypto loans let you borrow fiat currency like US Dollars against your crypto holdings. You can use these proceeds to buy more crypto, purchase a car or home, or anything else you like.
  • Borrowers are not taxed on their loan proceeds, which is especially useful to those with large unrealized gains in their cryptocurrency portfolio.
  • Crypto assets put up as collateral are still owned by the borrower, so you continue to benefit if the price of the collateral appreciates.

Borrowing Crypto in 2023: Industry Insights

In 2022, two prominent crypto lenders, Celsius and BlockFi, filed for bankruptcy protection following the fallout from the Terra Luna collapse. We learned the industry is deeply interconnected, and one company’s hardships can create ripple effects or even tidal waves elsewhere.

2023 brings a sager approach to crypto lending and borrowing. Expect loan-to-value (LTV) requirements to increase for borrowers as lenders reassess their risk strategies. Much of the growth in 2023 is expected to come from decentralized protocols, which typically require over-collateralization.

In the decentralized finance (DeFi) world, you’ll still be able to borrow against your crypto (and NFTs), but you’ll have to put a bit more on the table – or reduce the loan size – compared to the crypto loans of yesteryear.

How to Borrow Crypto in 5 Steps

Step 1: Choose your lending platform.

Decide whether you want to use a centralized lender, such as Nexo (detailed later in the article) or a DeFi protocol such as Aave (also covered in the article).

The interest rate, term, and amount you can borrow may make some options more attractive.

Step 2: Choose an asset as collateral.

Crypto lending uses collateral to secure the loan.

Step 3: Choose a loan amount.

The amount you can borrow is driven by loan-to-value (LTV). Most platforms cap LTV at 80% or less. However, the safest loans are found at the lowest LTV (15% to 35%) because price changes can cause a liquidation if the LTV increases with falling prices.

Step 4. Connect your wallet.

You’ll need to connect a wallet to transfer collateral or give the lender access to your collateral. In some cases, lenders use a custodial wallet. In other cases, you may be able to use a multi-sig wallet.

Quick Sip

A multi-sig wallet requires more than one wallet signature. For example, when borrowing against your crypto, maybe you hold a private key (to sign transactions) and the lender holds a key. There’s also a possibility that a 3rd party holds a key. This is a safer way to go, but not all lending platforms support multi-sig.

Step 5: Transfer collateral to finalize your loan.

Depositing your crypto (or setting up a private key with the lender) is the last step. In some cases, your funds are immediately available, although centralized lenders could take longer to fund the loan.

  • What is a Crypto Loan?

    Expand to learn more

    Crypto loans allow you to borrow a lump sum of money in return for putting up your cryptocurrency assets as collateral. Lenders provide these loans through their platform with low-interest rates and no origination fees.

    A crypto loan works much like a traditional line of credit — a borrower is approved for a loan, funds are deposited into their account, and they are assigned a repayment schedule with a monthly payment that covers the principal of the loan as well as interest, or just interest in the case of an interest-only loan.

    In the case of a traditional loan, a physical asset such as a vehicle or a real estate property may be the collateral for the loan. With crypto loans, the borrower deposits their cryptocurrency assets as collateral.

    The borrower still owns these assets, even while they’re being held as collateral, so if the market price of the assets appreciates, the borrower still benefits from that appreciation.

  • How do Crypto Loans Work?

    Expand to learn more

    Crypto-backed loans let you easily borrow cash using your Bitcoin or other crypto assets as collateral for your loan. This allows you to quickly access liquidity without needing to sell your crypto holdings, which can be tax advantageous for certain investors.

    A handful of crypto lending platforms offer crypto loans with competitive interest rates, same-day funding, and limited to no credit checks. We compare each provider's rates, terms, and why you may want to use each to help you decide which crypto lender may be right for you.

    When considering a crypto backed loan, keep in mind that cryptocurrencies are volatile; if the crypto collateral's value falls below a certain threshold, you will need to post more collateral or risk having your existing collateral liquidated. Therefore, it's essential to carefully consider the loan-to-value ratio and keep it as low as possible to get the best interest rates and withstand market volatility.

  • What Can I Use a Crypto Loan For?

    Expand to learn more

    When you borrow against your crypto, you can use the loan proceeds for anything you desire. The lender will fund your loan directly to your bank account, and you can use the proceeds as you wish. Some common use-cases for crypto loans include:

    • Crypto real estate mortgages - some borrowers will borrow against their crypto to acquire real estate or in particular, rental properties. This allows the borrower to continue owning their crypto and benefiting from future price increases, while also acquiring a diversified asset (real estate) which will generate cash yields.
    • Buying more crypto - borrowing against your crypto provides you with cash that can be used to buy even more crypto. This helps investors "buy the dip" without needing to contribute more of their personal assets into their crypto portfolio. One benefit of this path is, if crypto goes down further, you have added more crypto to your portfolio which can be used to easily meet margin calls with the lending platform.
    • Paying your taxes - borrowing against your crypto is an easy way to raise cash to pay income taxes without needing to sell your crypto, which could trigger even more taxes due.

Top 3 CeFi Crypto Loan Platforms for February 2023

Below are our editors' picks for crypto lending platforms, including important information about each lender:

1. Nexo

  • Interest rates: Fixed
  • Min/Max Loan Size: $50 to $2,000,000.

Why borrow with Nexo?

  • Rates start at 0% for borrowing and never exceed 13.9% — which means that this platform is often the cheapest way to borrow.
  • You have the choice between fiat, crypto, or a combination of both to repay your loan.
  • Approval can be instant for borrowers and the funds are typically available within 24 hours.
Supported collateral assetsInterest rate rangeOrigination feesLoan types offeredLTV Range
NexoBTC ETH BNB DAI +more0% - 13.9%0%Custom repayment schedules15% - 90%

Learn more about Nexo by reading our full Nexo review or start borrowing at Nexo now.

2. Binance

  • Interest rates: Fixed
  • Min/Max loan size: No minimum or maximum. You can borrow any amount if you can post collateral and comply with the required risk ratio.

Why borrow with Binance?

  • The platform supports borrowing for numerous types of cryptos.
  • Terms are flexible and borrowers can choose from terms that include 7, 14, 30, 90 or 180 days.
  • There are no early repayment penalties if you want to pay back what you borrowed before the term is up.
  • The borrowing fees are relatively low in comparison to other platforms.
Supported collateral assetsInterest rate rangeOrigination feesLoan types offeredLTV Range
BinanceBTC ETH SOL DAI + many moreDynamically calculated0%Principal + interest due in lump sum at the end of the loan term60-65% depending on the collateralized asset

Learn more about Binance by reading our full Binance review or start borrowing at Binance now.

3. CoinLoan

  • Interest rates: Fixed
  • Min/Max loan size: Unspecified– you can borrow up to 70% of your collateral.

Why borrow with CoinLoan?

  • The annual interest rates for borrowers start at 4.95% and go up to 11.95%, which is lower than a lot of competitor rates.
  • Crypto-to-crypto, crypto-to-fiat, and fiat-to-crypto loans are all options with this platform.
  • The rate comparison tool is handy for borrowers and lenders alike.
  • Borrowers set their own terms, including the loan length and repayment options.
Supported collateral assetsInterest rate rangeOrigination feesLoan types offeredLTV Range
CoinLoanBTC ETH SOL MKR + more4.95% - 11.95%1%Custom repayment options20% - 70%

Start borrowing at CoinLoan now.

Top 4 DeFi Borrowing Platforms of 2022

Another option for crypto loans is to go through a decentralized finance platform, which means you are borrowing directly from other crypto users via smart contracts on the blockchain instead of going through a centralized company.

Borrowing via a DeFi platform requires some level of technical knowledge, as you will need to utilize a DeFi-capable crypto wallet to interact with the DeFi protocol. Below are our editors' picks for the top DeFi borrowing platforms.

1. Aave

  • Interest rates: Variable

Why borrow from Aave?

  • Flash loans are an option, which can be useful for preventing Maker Vault liquidations and taking advantage of arbitrage opportunities.
  • Users can trade with leverage on Aave borrowing rates using Swap Rate.
  • Borrowing fees are incurred at inception.
  • Loans can be insured using Nexus Mutual.
Supported collateral assetsSupported borrow assetsInterest rate rangeFlash Loans Offered?LTV RangeInterest rate typesOther fees
AaveBTC ETH MKR USDC + moreWBTC MKR USDC + moreDepends on capital availableYes35% - 80%Fixed or variableETH gas fees

Learn more about Aave by reading our full Aave review or start borrowing at Aave now.

2. Maker

  • Interest rates: Variable

Why borrow from Maker?

  • As a stablecoin, it’s easy to know exactly how much debt will be owed on any given loan.
  • Users can easily re-collateralize or draw additional Dai directly from the Oasis dashboard.
  • The platform offers asset management tools like DeFi Saver, which allow users to ensure Vaults are sufficiently collateralized, even when the market is volatile.
  • Maker Vaults are integrated into other asset management tools like InstaDapp or Zerion for easier tracking.
Supported collateral assetsSupported borrow assetsInterest rate rangeFlash Loans Offered?LTV RangeInterest rate typesOther fees
MakerWBTC ETH MATIC + moreDAI0% - 6%Yes54% - 99%VariableETH gas fees

Start borrowing at Maker now.

3. Compound

  • Interest rates: Variable

Why borrow from Compound?

  • Compound has proven itself to be a reputable provider with a strong reputation and backing.
  • Borrowers can insure their loans using Nexus Mutual.
  • Users can leverage asset management tools like Zerion and DeFi Saver to manage their loans.
Supported collateral assetsSupported borrow assetsInterest rate rangeFlash Loans Offered?LTV RangeInterest rate typesOther fees
CompoundWBTC ETH YFI DAI + moreWBTC ETH YFI DAI + more1.31% - 6.46%Yes65% - 85%VariableGas fees

Learn more about Compound by reading our full Compound review or start borrowing at Compound now.

4. Alchemix

  • Interest rates: Variable

Why borrow from Alchemix?

  • Borrow up to 50% of your deposited collateral.
  • You can choose to self-liquidate your own loan at your own discretion.
  • The platform doesn't lock your deposit or charge you fees.
  • The funds you put up for collateral are accessible 100% of the time.
  • The debt can be repaid whenever you like.
Supported collateral assetsSupported borrow assetsInterest rate rangeFlash Loans Offered?LTV RangeInterest rate typesOther fees
AlchemixWETH DAI USDC USDTYearn and Aave versions of your deposited asset0.17% - 3.85%No50%VariableETH Gas fees

Start borrowing at Alchemix now.

  • DeFi Loans

    Expand to learn more

    Crypto loans can also be used to borrow assets other than fiat currency. Most popular cryptocurrencies such as Bitcoin and Ethereum are available for borrowing against other crypto assets like Solana, for example.

    This route can be useful for those looking to trade or stake more crypto than they have on hand. Many platforms even offer the ability to borrow crypto against fiat collateral.

What Do I Need in Order to Get a Crypto Loan?

In addition to the basics like having cryptocurrency available to serve as collateral, borrowers need to cover some additional requirements before taking out a crypto backed loan.

Know Your Customer

Know Your Customer (KYC) verification is an identity check required by centralized platforms. KYC checks are usually automated, simple processes that involve providing your name and address information, as well as uploading pictures of your government ID.

Quick Sip

Currently, most DeFi platforms don’t require KYC. Instead, you sign a smart contract using your crypto wallet to take the loan. This doesn’t always make you anonymous, however. It may be possible to track the original crypto purchase or transfer to your wallet using blockchain analysis tools.

Eligible Collateral

To get ready for taking out a crypto loan, set aside the collateral amount that you plan on using for your loan. Collateral (which can be in crypto, and even NFTs) is the most important factor in determining the amount of cash you are eligible to borrow.

Most lending platforms don’t take into account personal credit history, so the amount of the loan is determined solely by the crypto collateral deposited. For example, if you have one ETH and are taking out a 50% LTV loan, you would be able to borrow 1/2 of the current value of ETH in USD through your ETH loan.

Due to these basic lending parameters, the underwriting process is quick and many platforms can deposit loan funds into a borrower’s account just a few hours after the loan application is completed.

What is Loan-to-Value (LTV) and How Does it Affect Loan Rates?

Loan-to-value, or LTV, refers to the ratio between your loan proceeds and the value of your posted collateral. The LTV of a crypto loan is calculated by dividing the loan amount by the market value of the tokens being used as collateral. For example, if you put down $10,000 worth of Bitcoin as collateral, and borrow $4,000 of USD, your LTV is 40%.

The LTV on a crypto loan is not static. Rather, it fluctuates based on the value of the assets used as collateral for the loan. This means that the LTV will also change — increasing when the value of the collateral declines, and decreasing when the value of the collateral increases.

The LTV can also affect crypto loan rates. The higher the LTV, the riskier the loan is — which typically translates to paying a higher interest rate in return. Some platforms cap the LTV at 50% and offer lower interest rates to borrowers with LTVs that are lower than 50%, while other platforms may allow borrowers LTVs up to 90% in return for higher-than-average interest payments.

  • Margin Calls

    Expand to learn more

    The purpose of collateral is to compensate the lender in the case that a borrower does not repay their loan. Most lenders, however, do not wait for borrowers to default on their loans before acting. If market moves drastically change the value of the collateral, lenders may exercise a “margin call.”

    Margin calls are when a lender asks a borrower to either pay down a portion of their loan, or add more collateral until their LTV is back in healthy territory. If the borrower fails to take either of these steps in time, the lender may being to liquidate the borrower’s collateral to protect themselves.

    Each lending platform has a different threshold for triggering a margin call, however for most platforms it’s when a loan’s LTV increases above 80-90%.

  • Interest-Only Loans vs. Interest & Principal: How Do They Compare?

    Expand to learn more

    When you borrow crypto, you may have the choice between an interest-only loan or a conventional loan where you repay both interest and principal over time. There are potential benefits and downsides to both options.

    An interest-only loan is a loan that only requires you to pay interest on the loan itself for a defined term, without paying down principal throughout the life of the loan. Once the term is over, you’ll owe any remaining amount for interest plus the principal in either one lump sum or in monthly payments. This type of loan can help keep your payments low initially but could have a high lump sum payment or high monthly payments over the long run.

    An interest and principal loan is a loan that requires you to make regular (typically monthly) payments for both the interest and the principal combined. The repayment schedule typically starts shortly after the loan has been issued and continues for a specified term until the loan and interest are fully repaid. This type of loan does not start out with low initial payments, but the benefit is that it keeps your payments consistent from month to month throughout the loan.

    Interest-only loans are typically more expensive than interest and principal loans, as the risk of default tends to be higher. And, because you are not gradually paying down the principal with an interest-only loan, your LTV will typically stay higher (unless the value of your collateral increases).

An Example

To illustrate the differences between interest-only and interest and principal loans, let’s take a look at an example loan.

For this example, we are borrowing $5,000 at a 50% LTV with a 12 month payback period. Here is how the payback schedules compare for an interest-only and an interest and principal loan:

Interest-onlyInterest and Principal
Loan Amount$5,000$5,000
LTV50%50%
Loan Term12 months12 months
Monthly Payment$28.96 for 11 months, + a lump sum of $5,028.96 in month 12$439.56 each month for 12 months
Total Amount Paid Back$5,347.52$5,274.72

As the table above illustrates, an interest-only loan has lower monthly payments for the first 11 months, but a large sum due all at once at the end of the loan term. The interest-only loan also has a larger final sum that the borrower owes due to its higher interest rate.

  • Are Crypto-Backed Loans Taxed?

    Expand to learn more

    In most countries, crypto loan proceeds are treated like normal loan proceeds and are therefore not taxed. This is in contrast to capital gains taxes which are triggered when crypto assets are sold for a profit.

    Interest payments made in service of a loan may be tax deductible depending on your specific circumstances. Borrowers should speak with a qualified CPA to understand if their interest payments are tax deductible.

    Since loan proceeds are not taxed in countries like the USA, many crypto holders will use crypto loans to strategically navigate their tax liabilities.

    When their crypto holdings appreciate significantly in price, rather than selling and incurring capital gains tax, these holders will instead take out a crypto loan using their newly appreciated assets as collateral.

    This will give them access to liquidity just as if they had sold their crypto, but without incurring the tax liability.

    Like we already mentioned, crypto loans incur an interest charge, but this is often a negligible fee to pay when compared to capital gains tax, so the loan strategy is preferred by many prudent traders.

Quick Sip

Crypto loan proceeds aren’t taxable. However, if the lender liquidates your collateral because the LTV ratio is too high (read: crypto prices crashed), the liquidation sale could create a taxable event.

  • Can a Company Get a Crypto Loan With Collateral?

    Expand to learn more

    Yes - many crypto lending platforms offer commercial loans to companies. The process of obtaining a commercial crypto loan is very similar to a personal crypto loan - the lender evaluates the crypto collateral the business has available, and will quote rates depending on the requested loan size and resulting loan-to-value ratio.

    Common uses for commercial crypto loan proceeds include:

    • Crypto mining companies who wish to scale up their operations, or access liquidity without needing to sell their mined crypto.
    • Startup companies looking to fund their initial operations.
    • Businesses that accept crypto as payment for products or services, and want to borrow cash against the crypto on their corporate balance sheet.
  • What Are The Common Crypto Loan Terms?

    Expand to learn more
    • Principal: The principal of a loan is the initial amount of money or crypto that was borrowed. The principal balance of a loan will change throughout the term of your loan as you make payments to the lender and reduce the amount you owe.
    • Interest: The interest on your loan is a fee that’s paid to a lender in return for borrowing money. The interest rate on a loan is typically expressed as an annual percentage rate, or APR. This APR will represent a certain percentage of the total principal and is what you will need to repay in addition to the principal.
    • Collateral: The collateral is the asset that the borrower allows the lender to hold temporarily in order to secure a loan. With crypto loans, the most common type of collateral is crypto tokens, which are held by the exchange or lender until the loan and interest are paid.
    • Loan-To-Value (LTV): The percentage value that a loan amount represents when compared to the value of the collateral deposited. LTV is calculated by dividing the loan amount by the market value of the assets being used as collateral.
    • Margin call: A demand from a lender that requires a borrower to either pay down some of their loan amount or to put up more collateral. Failing to meet a margin call can result in the liquidation of the borrower’s collateral.
    • Grace period: The grace period of a loan is a period of time in which the lender will not require the borrower to make payments. For example, a 60-day grace period would be a 60-day period in which the borrower would not have to make any payments to the lender. Once that grace period is over, the repayment period starts, and the borrower will typically need to issue a payment for the portion of both the principal and interest to the lender each month.
    • Origination fee: A loan origination fee is a fee that’s charged by a lender in return for evaluating and processing a loan application. The origination fee is typically a one-time fee that’s charged up-front and is either calculated as a percentage of the loan’s face value or a fixed dollar amount.
  • Popular Crypto Collateral Tokens

    Expand to learn more

    There are a few different popular types of crypto tokens used as collateral, including:

    Borrow against Bitcoin (BTC)

    Another popular option for collateral is Bitcoin, or BTC. Not only is the token a big name in crypto and in borrowing, but certain platforms allow users to put up BTC as loan collateral to receive stablecoins, like USDC or DAI, in return.

    Borrow against Ethereum (ETH)

    Ethereum, or ETH, tokens are one of the most popular tokens used as collateral. A large percentage of borrowers opt to put up ETH as collateral, as it is supported by virtually every borrowing platform and the value doesn’t fluctuate as much as it does with many other types of tokens.

    Other common tokens used as crypto collateral include:

    • LTC
    • AAVE
    • NEXO
    • AVAX
    • MATIC
    • 1INCH
    • Numerous others

Pros and Cons of Borrowing Crypto

Pros

  • Access funds without selling
  • Low interest rates for certain loan types
  • Nearly instant access to borrowed funds

Cons

  • Risk of margin calls or liquidation
  • The lender might become insolvent
  • Some lenders lend out your collateral to others or use your collateral in trades

What Are The Risks For Crypto Loans?

There is always a risk when it comes to investing, and crypto loans are no different. When it comes to crypto loans, the common risks include:

  • Margin calls: If the value of your collateral assets declines quickly, your loan may reach a liquidation threshold that triggers a margin call. You should always be ready to pay down a part of your loan or to deposit more collateral, otherwise you are at risk of having your collateral liquidated by the lender.
  • Platform insolvency: When you are borrowing from a crypto lender, your collateral will be stored with the lender until your loan is repaid. Should the platform become insolvent, you could run the risk of losing your tokens for good.
  • Cyber attacks: Hacking and other security issues are common in the crypto space, and when you’re handing over temporary custody of your tokens to a crypto exchange as collateral for a loan, any cyber attacks that occur could put your assets at risk.
  • Not FDIC insured: Another thing to consider is that crypto lending platforms are not insured in the same capacity as traditional lenders. That too could put the parties involved in a crypto loan at risk, should there be an issue that causes one or the other to lose their tokens.

You can minimize these risks by investing with an established platform or exchange to help facilitate your crypto loan.

There are numerous options to choose from in both the centralized and decentralized spaces, so be sure to compare the platforms and features before committing to any crypto lending platform.

Are There Any Other Fees For Crypto Loans?

If you’re looking for a crypto loan, you may encounter a number of different types of fees tied to these loans. These fees typically vary by platform, but can include exchange fees, network fees, deposit or withdrawal fees, and origination fees, among others.

One common type of crypto loan fee is an origination fee, which is a one-time fee that is typically calculated as either a flat fee or a percentage of the loan amount.

Not all lenders will charge this fee, but it can be costly if they do. For example, some exchanges may charge a 2% origination fee on crypto loans, so you’ll need to account for that amount if you’re borrowing on this platform.

Below is a table with basic fees broken down across a few popular lending platforms.

NexoBinance
Origination Fee0%0%
Withdrawal FeeBase tier - 1 free crypto withdrawal per monthVariable
Prepayment fee0%0%

Given that each platform charges its own fees for crypto loans, it’s important to do your research beforehand to find out which one works best for you. Look at all of the potential fees and charges associated with each platform before making your pick.

Should You Borrow Crypto?

The single most important aspect of crypto borrowing is knowing that your crypto could be at risk.

  • LTV risk: If your loan–to-value ratio increases, you could get a margin call (more collateral required) or face liquidation (the lender sells your collateral to satisfy the loan).
  • Lender risk: If the lender becomes insolvent or faces liquidity issues, your collateral could become inaccessible. In a worst case scenario, such as a liquidation bankruptcy, some or all of your crypto collateral could be gone.

Once you understand the key risks, you can decide if a crypto loan is a good solution for your borrowing needs. Interest rates vary from about 1% to more than 10%, so there may be better options, depending on how much you need to borrow and which options are available to you through traditional finance channels. Home loans or auto loans, for example, may be available with a lower interest rate.

Quick Sip

When a lender takes you collateral and uses it for another purpose, it’s called rehypothecation. While legal, this dubious practice can put your crypto at risk. Imagine a lender who takes your collateral and uses it as collateral in their own market activities, losing the collateral on a bad bet. Either way, the collateral is gone. That’s rehypothecation risk.

Also, consider the platform before you make a decision. With some centralized lenders, you may not know if your crypto collateral has been loaned out again (and again), possibly making recovery impossible. Read the fine print and research the lender before making a sizable deposit.

Finally, consider the LTV and market risk. Some (formerly) top-ten cryptocurrencies, like Solana, are down more than 90% in the past year.  A more conservative LTV ratio can reduce the risk of margin calls or liquidations during market swoons.

Frequently Asked Questions

  • Are crypto loans safe?

    Expand to learn more

    We are strong believers that using any of our top picks to take out a cryptocurrency loan is as safe as borrowing in legacy markets. Please note there is always a slight degree of risk with any borrowing opportunity and that you should never borrow more than you will be unable to repay.

  • Why do crypto borrowing interest rates change?

    Expand to learn more

    In general, floating interest rates change in response to the utilization ratio of underlying capital pools. If there is a vast amount of a certain type of crypto available to be borrowed, the rate to lend and borrow related to that crypto will be quite low. As that pool gains popularity, loan rates will get higher.

  • What do people use cryptocurrency loans for?

    Expand to learn more

    There are numerous uses for crypto loans — and the purpose behind borrowing with a crypto loan is as varied as the reasons behind any other type of borrowing and lending. For example, it’s common for loans to be used to collateralize debt positions, participate in liquidation auctions, or trade on margin using exchanges. Additionally, borrowers can use crypto loans to access liquidity tax-free rather than selling assets when they experience large price appreciation.

  • What do I need to get started with a crypto loan?

    Expand to learn more

    Virtually all DeFi protocols are accessed using a Web3 wallet like MetaMask. To get started, users simply need to supply their wallet with a small amount of ETH to pay for transactions and whatever capital (in the form of the supported cryptocurrency) they wish to supply as collateral to borrow against.

  • What is the biggest factor that affects interest rates when borrowing against crypto?

    Expand to learn more

    The biggest factor for the loan interest rate is the LTV (loan-to-value). For example, SALT Lending offers borrowing rates as low as 0.95% at 20% LTV, 6.95% at 50% LTV and up to 9.99% at 70% LTV.

  • Is there a credit score check?

    Expand to learn more

    For most crypto loans, there is no credit check. With traditional loans, lenders utilize credit score checks in order to gauge the risk of a borrower defaulting on their loan. Since crypto loans, unlike traditional loans, are fully secured by collateral, lenders do not need to perform credit score checks. If the borrower defaults on a loan, the lender liquidates the collateral to pay back the borrowed funds.

  • Can my business get a crypto loan?

    Expand to learn more

    Yes - companies can borrow against their crypto in the same fashion that an individual does. The lending platform will evaluate the borrow's collateral and quote loan terms depending on the amount of cash the borrower has requested and the resulting loan-to-value ratio.

  • Are there minimum or maximum loan sizes?

    Expand to learn more

    Yes - each platform will have their own loan minimum and loan maximum. Typical minimums are around $1,000 and maximums can go well into the millions - SALT Lending, for example, has funded loans in the tens of millions.

  • Do I need to personally guarantee my crypto loan?

    Expand to learn more

    Most lending platforms, like SALT Lending, do not require you to personally guarantee your loan. Your cryptocurrency serves as their sole collateral and you will not need to give a personal guarantee beyond transferring your crypto collateral to the lending platform.

  • Can I get a crypto loan without collateral?

    Expand to learn more

    Yes, it is possible to get a crypto loan without posting collateral. This is a more difficult path and tends to be more available for institutional borrowers who have strong credit profiles. Individuals who want to borrow crypto will typically need to post and transfer collateral to receive their loan. A reputable provider of crypto loans without collateral is Atlendis.

Contributors

  • Avatar of George Hristov

    George is a tech writer interested in web3 startups and communities. In the dynamic world of crypto, he stays plugged in to the day-to-day headlines, deep dives, and industry commentary.

  • Avatar of Shannon Ullman

    Shannon Ullman is a senior editor for MilkRoad.com. Shannon specializes in cryptocurrency and personal finance. Her work has appeared in publications like The Motley Fool and Insider.