Bitcoin Loans: How to borrow against your BTC
Key Points About Bitcoin-Backed Loans
- You can use your Bitcoin as collateral to access capital without selling your $BTC.
- Avoid creating a taxable event by using your Bitcoin as collateral for a loan.
- Choose from centralized lenders or a growing number of DeFi protocols.
What is a Bitcoin-Backed Loan?
A Bitcoin-backed loan allows you to borrow money (USD, stablecoins, or other cryptocurrencies) by using your Bitcoin holdings as collateral. Your Bitcoin is the asset that secures the loan with the lender and ensures that you’ll pay back your loan. You benefit by getting access to cash without needing to sell your bitcoin. The lender benefits by charging you interest on the loan.
This is similar to how a HELOC (Home Equity Line of Credit) works in traditional finance where you can get a loan against the equity of your house. Only with a HELOC, you’re using your home as the asset to secure the loan instead of your Bitcoin.
Now, we’ll cover key terms like LTV and margin calls to help you fully understand Bitcoin-backed loans. If you’re already familiar with the basics, feel free to skip ahead to our roundup of the best CeFi and DeFi platforms for Bitcoin loans.
Why Consider a Bitcoin Loan?
You may be wondering “why not sell my Bitcoin and use the cash I get from the sale?”
Here are a few of the benefits of using a bitcoin-backed loan instead of selling your bitcoin to get cash:
- Avoiding taxes: Assuming your Bitcoin is worth more now than when you purchased it, selling some (or all of it) will most likely trigger a taxable event and you’d need to pay short-term or long-term capital gains taxes. With a loan, however, you’re not selling any Bitcoin, so you don’t have to pay taxes on the cash you get from the loan.
- You get to maintain your Bitcoin exposure: If you think Bitcoin is going to be worth more in the future than it is now, you don’t want to have to sell your Bitcoin and lose out on those gains.
- Quick liquidity: You can get cash from a Bitcoin loan in about the same amount of time it would take to sell those Bitcoins. Using DeFi platforms (that we’ll cover here in a minute) will allow you to take a Bitcoin loan out in a matter of minutes, 24/7, 365 days a year. Centralized platforms will take longer to approve your loan (a few hours to a few days).
- Deductible Interest: In some cases, particularly for commercial loans used to fund real estate or business-related purchases, the interest for your loan may be tax-deductible. Discuss your specific situation with a qualified tax advisor.
How Do Bitcoin Loans Work?
Let’s say you need to borrow $10,000 to cover a major expense. You can’t give the lender $10,000 worth of Bitcoin and expect $10,000 of cash or stablecoins in return. You need to give them more collateral than the amount you want to borrow.
This is called an over-collateralized loan. How much the loan needs to be over-collateralized varies depending on the lender but typically falls in the range of a maximum of 50% to 70% loan-to-value ratio.
If the lender you choose has a maximum of 50% LTV, in order to borrow $10,000 you would need to deposit at least $20,000 worth of Bitcoin.
If the lender you choose has a maximum of 70% LTV, in order to borrow $10,000 you’d need to deposit at least $14,285 worth of Bitcoin.
So A Higher LTV is Better Right? Not so fast…
One of the risks of taking out a Bitcoin loan is that the price of Bitcoin can be volatile. The value of your collateral will change significantly in a short period of time.
That means if the price of Bitcoin drops, the value of your collateral drops. And as the value of your collateral goes down, your LTV ratio goes up.
If your LTV gets too high, typically in the 75%-90% LTV range, the lender will sell your collateral to repay the loan.
To add insult to injury, if your loan is liquidated, that would trigger a taxable event. Taking a Bitcoin loan isn’t a taxable event, however, a forced liquidation can create a taxable event for capital gains, assuming your cost basis is below the liquidation value.
If you’re using a centralized platform, the lender may give you a margin call before liquidating your loan, which is a demand from the lender that you either pay back some of the loan or tell you how much more bitcoin you need to provide as collateral.
But if you’re using a decentralized protocol you’ll need to closely monitor your LTV because the smart contracts will automatically liquidate your loan if the LTV gets too high.
Let’s cover margin calls in more depth…
Margin Calls: What They Are & How to Avoid Them
A margin call refers to a notice from the lender informing you that you’ll need to add more collateral (or pay down the balance) to maintain an acceptable loan to value ratio for the loan. Some lenders use the term “collateral call”.
For example, if you provide $20,000 worth of Bitcoin as collateral on a $10,000 loan, the initial LTV is 50%. But if the value of the Bitcoin falls to $15,000 without any change in the loan balance, the LTV rises to 66-67%. With many lenders, you can expect a margin call if the LTV rises that high. If the value of the collateral falls much further, the lender may liquidate the collateral to settle the loan balance.
Here are the LTV guidelines from one well-known lender:
- Target LTV (50%): In this case, the target LTV is the ratio at which the loan started and the level at or below which the lender wants the ratio to remain.
- Margin Call LTV (70%): Expect a margin call notice from the lender when the LTV reaches 65% to 70%, assuming a 50% target LTV. This level varies depending on the initial LTV and sometimes by collateral type.
- Liquidation LTV (80%): If the value of the collateral continues to fall and you haven’t added collateral (or paid down the loan), the lender can liquidate your collateral to pay the loan balance.
Are There Other Risks When Borrowing Against Bitcoin?
Bitcoin loans can bring distinct risks, some of which are unique to collateralized lending and specifically crypto loans.
- Custodial Risks: When borrowing on centralized platforms, you’ll need to deposit Bitcoin directly to the platform. In case the platform gets hacked or goes bankrupt, you are at risk of losing all your funds. Always use a reputable and responsible platform for your loans.
- Rehypothecation: When you pledge your Bitcoin as collateral that act is called hypothecation. If the lender then pledges the asset again for its own purposes, it’s called rehypothecation. Consider this risk carefully and research the lender before committing your coins.
- Smart Contract Risks: On DeFi lending platforms, your loan is managed by smart contracts.If there are flaws or errors in the code, that can create a vulnerability for hackers to steal your collateral.
How To Choose a CeFi or DeFi Loan Platform
Now that you know the benefits and the risks of taking out a Bitcoin loan, let’s dive into where you can get a BTC-backed loan. You can choose between using a Centralized Finance (CeFi) platform or a Decentralized Finance (DeFi) protocol.
Here are some pros and cons to help you choose what’s best for your situation:
Feature | CeFi Platforms | DeFi Platforms |
---|---|---|
User Experience | ✅ Beginner-friendly, customer support, smoother onboarding | ❌ Requires wallet setup, network fees, and more technical knowledge |
Loan Approval | ❌ Depends on your location; Will likely ask for ID for KYC | ✅ No geographical restrictions, open to everyone. |
Collateral | ✅ Native BTC accepted | ❌ Must convert to wrapped BTC (wBTC) or Coinbase wrapped BTC (cbBTC) to use on Ethereum or other chains |
Control & Transparency | ❌ Platform controls funds and rules | ✅ Open-source, transparent smart contracts |
Custody | ❌ You deposit BTC to their platform; they hold it | ❌ Platform controls your collateral ($BTC) until you repay the loan |
Security Risks | ❌ Exchange custody risk, platform hacks, insolvency | ❌ Smart contract bugs, oracle manipulation, user error |
Fees | 🟡 May include origination, withdrawal, and liquidation fees | 🟡 Network gas fees, variable interest based on supply/demand |
Interest rates | 🟡 Fixed or tier-based (e.g. Loyalty programs) | 🟡 Floating rates based on market dynamics |
Examples | 🟡 Nexo, Ledn, SALT | 🟡 Aave, Compound |
Top CeFi Bitcoin-Backed Loan Platforms
If you’re new to crypto, want to have customer support available if you need help, or just prefer the look and feel of more traditional banking, then a centralized finance (CeFi) platform is the way to go.
Our go-to picks are:
They all offer Bitcoin-backed loans, but they vary in their interest rates, origination fees, their minimum and maximum loan values, loan terms, liquidation thresholds, and not all features may be available in your jurisdiction.
Nexo

As an all-in-one crypto platform, Nexo offers a convenient way to buy, sell, earn yield, or borrow. With Nexo’s credit line wallet, you can borrow up to 50% of your Bitcoin’s value. Competitive interest rates favor Gold and Platinum loyalty level users, ranging from 2.9% for platinum loyalty level users, 5.9% for gold users and up to 18.9% for base level users.
Borrowing With Nexo
- Low rates for Platinum and Gold users (2.9% and 5.9% respectively)
- No origination fees and low minimum loans
- Borrow up to $2 million
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$BTC, $ETH, $XRP, $LTC & more | 0% | 2.9% – 18.9% | $500 | $2 million | Bitcoin borrowing rates as low as 2.9% to 5.9% for Platinum and Gold respectively |
Ledn

Founded in 2018, Ledn places its focus on the Bitcoin community and selected Bitcoin-backed loans. The Toronto-based company prides itself on transparency, security, and privacy. Choose from Bitcoin-backed loans, which provide funding in USD or USDC.
Borrowing With Ledn
- Transparency: Verify your deposit with Ledn’s innovative proof-of-reserves feature
- Fast turnaround: Get funding in 24 hours or less
- Borrow from $1,000 to $1,000,000 with 50% LTV
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$BTC, $ETH and $USDC | 2% admin fee | 5.5% | $1,000 | $1,000,000 | Ledn offers proof-of-reserves, letting you verify your deposit at any time |
SALT

Specialized in Bitcoin-based lending and borrowing, SALT is a platform that lets you borrow cash or other cryptocurrencies using your Bitcoin as collateral.
They’ve been in the space since 2016. Individuals and business alike have trusted SALT to go about their $BTC lending and borrowing.
Borrowing With SALT
- The original provider of Bitcoin-backed loans
- No credit checks or prepayment penalty fee
- Offers loans starting at 8.95% APY
- Offers a loan-to-value (LTV) ratio of up to 70%
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$BTC, $ETH, $LTC and more | 5% | 5% – 15% | $5,000 | $1 million | SALT is one of the quickest in the space, with clients receiving their funds in as little as 24-48 business hours after approval. |
Top DeFi Platforms for Bitcoin-Backed Loans
If you’re more crypto savvy, comfortable using a browser wallet or hardware wallet, want the best rates, and don’t mind a lack of customer service, then a DeFi loan might be best for you.
Here are three popular DeFi borrowing protocols:
Rocko

Rocko is a crypto loan marketplace that makes it easy to borrow $USDC using your crypto as collateral. Instead of jumping between platforms like Aave and Compound (which we cover below), Rocko brings them all under one roof.
It scans for the best rates across top protocols and serves them up in one clean, user-friendly interface. The catch? You can only borrow $USDC.
Borrowing With Aave
- Offers the best rates across major DeFi lending protocols
- Wide range of collateral assets
- No monthly repayments
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$ETH, $SOL, $WBTC, $CBBTC, $WSTETH, $TBTC, $UNI, $LINK, $CBETH, and $AAVE | 1% on new loans | Approx: 2%-8% (most competitive interest across major lending platforms) | None | None | Rocko finds the best rates across all of these protocols and gives them to you in one clean and simple interface. |
Aave

Aave is both fun to say (Ahvay) and intuitive to use. The DeFi borrowing platform lets you borrow on a wide range of collateral assets including Bitcoin ($WBTC).
If there’s a gotcha with Aave, it’s that you’ll get a variable rate when borrowing in many cases. Variable rates are based on supply and demand, so rates for low-supply tokens can spike.
For a video walkthrough of how to use Aave for your Bitcoin Loan, check out our guide: How to Borrow Against Your Bitcoin Using Aave
Borrowing With Aave
- The biggest name when it comes to borrowing & lending
- Supports over 15 blockchains
- Offers flash loans
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$BTC, $ETH, $USDT, $USDC, $USDS, $AVAX & more | None | 3%-10% APY (depends on the asset) | $100 | None | With Aave, users can switch between stable and variable interest rates allowing for greater flexibility while borrowing. |
Compound

Although not as easy to use as Aave, Compound offers a similar service: immediate liquidity when you want to borrow against Bitcoin.
You’ll find fewer selections of cryptos to borrow compared to Aave, but you will most definitely find Bitcoin ($WBTC) on both the platforms.
Borrowing With Compound
- Anyone can borrow with Compound without banks asking you why you need the money
- Compound’s open-source code (smart contracts) is regularly audited.
- Pay back the loan on your schedule (interest accrues).
Crypto Accepted For Collateral | Origination Fees | Interest Rates | Minimum Provided Loans | Maximum Provided Loans | Standout Feature |
---|---|---|---|---|---|
$WBTC, $ETH, $USDT, $USDC, $COMP and more | None | 3%-10% APY (depends on the asset) | $20 | None | Compound’s standout feature is its changing interest rates. These rates go up or down based on how many people want to borrow or lend a particular cryptocurrency. |
Bitcoin Loan Payment Options
Interest-Only Vs. Interest & Principal Vs. Credit Lines
You’ll find three distinct types of loans offered by Bitcoin lenders.
- Interest-Only Loans: With an interest-only loan, you don’t pay down the principal each month. Instead, you’ll pay interest only, with a lump sum due at the end of the loan term. You may be able to roll the balance over into a new loan.
- Interest And Principal: An interest and principal loan is similar to an auto or home equity loan (mortgage), wherein your monthly payments cover interest but also pay down the loan balance. With fixed monthly payments, you can plan your pay back schedule more effectively.
- Credit Lines: Similar to a line of credit you might have based on your home equity, a Bitcoin-backed line of credit lets you access cash based on the amount of $BTC you deposit. With a line of credit, you only pay interest on the amount you draw from the credit line, and there is no fixed term.
A given loan type may not be the best fit for the way you want to deploy capital. Some lenders may offer more than one type of loan. With several well-established lenders to choose from, you have options.
Loan Payment Comparison
Several lenders offer a calculator that helps you understand the total costs for the loan as well as monthly payments. Before choosing, compare loan costs and loan types available from the providers you’re considering.
Different types of loans have differing interest costs as well. For example, here we compare an interest-only loan compared to a loan that requires interest and principal payments.
Interest-Only | Interest And Principal | |
---|---|---|
Borrowed Sum | $50,000 | $50,000 |
Interest Rate | 9% | 9% |
Term Of Loan | 12 months | 12 months |
Loan to Value Ratio | 50% | 50% |
Monthly Repayment | $375 for 11 months with a final payment of $50,375 on month 12 | $4,373 monthly (12 payments) |
Total Owed | $54,500 | $52,471 |
Total Interest Charged | $4,500 | $2,471 |
Fees for Borrowing Against Your $BTC
Fees for Bitcoin loans are straightforward in most cases.
- Origination Fee (sometimes called an Administration Fee): Some loans require a one-time fee for admin expenses. Some lenders call it an administration fee. Although it’s a one-time fee, $BTC loans are typically short-term loans, so a one-time fee can have a big impact on borrowing costs.
- Withdrawal Fee: With some lenders, you may have to pay to withdraw your Bitcoin from the platform.
- Liquidation Fee: Check the fine print for details on fees for liquidations. On some platforms, you could pay up to 7% of the collateral value.
You’ll also want to consider conversion fees and costs associated with moving capital where it needs to be.
For example, a loan may fund in USDC, but maybe you need USD – and you need it in the bank. Moving the money will add to the loan cost. As another example, if you’re using a DeFi platform, there may be costs to moving your assets to and from the platform.
Crypto Loans Without Collateral
There are ways to get a Bitcoin loan without depositing any collateral but keep in mind that these are extremely high-risk strategies and we don’t recommend this.
The most “crypto-native” way to get a Bitcoin loan without collateral is called a “Flash loan“. These uncollateralized loans must be borrowed and repaid within a single transaction. They are often used to take advantage of quick arbitrage opportunities, hence the name “flash”.
If you’re looking for more long-term crypto loans without collateral, here are a few options:
- Peer-to-Peer Lending: Some platforms facilitate peer-to-peer (P2P) lending where individuals can borrow Bitcoin without deposits.
- Unsecured Loans: Some platforms offer unsecured loans based on your creditworthiness rather than collateral. This is similar to traditional loans, but they may require a good credit score and thorough background check.
- Higher Interest Rates: Because these collateral-free loans are riskier for lenders, they often come with higher interest rates compared to secured loans.
The options for crypto loans without collateral are more limited compared to TradFi, and they may not be available in all regions.
In Conclusion
Bitcoin loans come in all shapes and sizes, offering a solution to many borrowing needs and allowing you to keep the asset as it grows in value.
While there are advantage to borrowing against your Bitcoin rather than selling, there are still risks involved. Keep an eye on borrowing costs and watch your LTV ratios carefully.
A well-chosen and well-managed Bitcoin loan can be a powerful part of your financial strategy.
Frequently Asked Questions
You can use Bitcoin as collateral for a loan on several lending platforms (including Nexo) as well as a growing number of decentralized lending protocols.
Bitcoin loans come with a number of risks, including margin calls and liquidation of your collateral.
Note: Because current DeFi protocols don’t run on Bitcoin’s blockchain, you’ll need to convert your Bitcoin to a tokenized version, such as $WBTC, which is a token on the Ethereum network designed to provide 1:1 value for $BTC.
Aave provides flash loans that don’t require collateral but these are extremely high-risk strategies.
Some lenders, such as SALT and Ledn, allow $BTC-backed loans for $1 million or more.
Very few lenders let borrowers borrow with 0% interest. It’s important to note that these 0% perks may be reserved for higher membership or loyalty tiers, possibly adding different costs to the platform.
Typically, lenders can complete funding within 24 hours. But some platforms, such as Nexo’s $BTC-backed line of credit, offer instant approval.
Expect to make a deposit for crypto loans. The exception would be flash loans offered by DeFi platforms such as Aave, in which the loan is paid back from the proceeds of an executed smart contract.

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