The majority of adults borrow money in some capacity at some point in their lives. Whether you’re buying real estate, you’re keen to invest, you’re paying off debts, or you’re faced with paying for emergency repairs, it’s useful to have the option of taking out a loan. In most cases, when you borrow, a lender will transfer cash to your account, but there are other options. As new currencies become more commonplace, it is now possible to secure funds using cryptocurrency. If you’re looking to take out a loan, and you own digital assets, this guide will provide useful advice about how to get a loan using your crypto.
What is a crypto loan?
When you take out a conventional loan, you fill in an application form and a lender will subsequently transfer funds to your account. Your loan may be secured against your home or your car, for example, or you might have a guarantor. A crypto loan is a different type of financial product, which is available to customers who have cryptocurrency. This type of arrangement enables you to borrow standard currency, for example, US dollars, using your crypto funds as collateral. When you apply for a crypto-backed loan, the lender will give you dollars, and in exchange, you will provide security through your cryptocurrency funds. In most cases, this will involve Bitcoin, Ether or Litecoin. In essence, the process of securing a crypto loan is very similar to a conventional cash loan, and it can provide an alternative option for crypto investors who don’t want to part with their digital assets.
Why would I consider taking out a crypto loan?
If you have cryptocurrency, it’s wise to explore the options open to you if you are looking to borrow money. You could go down traditional lending routes, but a crypto-backed loan could be a better choice for you. If you choose to pursue this avenue, you can use your digital funds as collateral, enabling you to borrow the money you need without selling your crypto. Many people choose to invest in cryptocurrencies like Bitcoin as part of a long-term plan to grow their money, but anyone can encounter problems or find themselves in a situation where they need access to cash quickly. If circumstances change, for example, a crypto-backed loan offers an alternative to selling currency. With this type of loan, you can access funds without losing your investment.
What can a crypto loan be used for?
There are myriad possibilities when it comes to using a crypto loan. We often find ourselves in situations where we need or want access to money rapidly and taking out a loan with your crypto can help in many different situations and scenarios. Some common examples include:
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Consolidating and paying off debts: If you have debts that are costing you money in interest, it’s beneficial to think about taking out a loan to consolidate your debt and reduce monthly payments. High-interest charges like those applied to credit and store cards can make it difficult to clear debts without paying a substantial amount in one go. If you clear expensive debts with a loan, you’ll be paying less each month, and you can start improving your financial situation faster.
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Buying real estate: Most lenders do not allow buyers to purchase properties using cryptocurrency. If you have crypto funds, and you’re hoping to invest in real estate, taking out a crypto loan will help you secure the acquisition without losing your cryptocurrency. Buying brick and mortar can be incredibly lucrative, especially if demand is high and the market is buoyant.
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Travel and vacations: Most of us enjoy getting away and taking a break. If you own crypto, you can borrow money to book a vacation or pay off travel expenses.
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Broadening your investment horizons: Investing carries risks, but there are ways to reduce risks and protect assets. One option is to try and diversify your investments and broaden your horizons. Taking out a loan using your crypto can help you do this.
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Setting up or supporting a business: If you run a business, you’re preparing to launch a startup, or you’re interested in backing a venture, you can access funds and credit streams using your cryptocurrency.
How can I apply for a crypto loan?
If you’d like to apply for a crypto loan, you can complete an online form. You will be asked to provide information to confirm and verify your identity, and the lender will also ask you how much you want to borrow and what kind of cryptocurrency you plan to stake. Your application will be checked and processed, and if you are successful, cash will be transferred to your account. The application process should be short and straightforward. If you have any questions, get in touch with the lender before you proceed.
It is critical to review the terms of the loan before you agree to go ahead and borrow money. Take your time to read the small print and check the terms and conditions. Your loan offer will contain details about the amount of money you’re borrowing, the term of the agreement and any fees and charges that may be applicable. Your offer will outline the collateral required. This will depend on the loan to value (LTV). If the value is low, the level of collateral will be higher and vice-versa. Typically, you can expect lenders to offer LTV between 20% and 50%.
When you have read the offer, you can decide whether or not you’d like to go ahead and accept. If you do choose to take out a loan using your crypto, your money will be transferred to you.
Summary
If you’re a cryptocurrency owner, and you’re thinking about applying for a loan, it’s beneficial to consider the option of taking out a crypto-backed loan. If you understand how to get a loan using your crypto and you choose a reputable, trustworthy lender, you can access the funds you need without having to sell your digital currency. Your crypto funds serve as collateral for a cash payment, which can be used for very important purposes such as a vacation, home repairs, investments or clearing debt.