The traditional loaning facilities are being pressured by the revolutionizing advancements of crypto-backed loans. These cryptocurrencies can be used to borrow money or even cryptocurrency itself. It acts as an asset to hold during the tenure of the loan.
Bitcoin Dealers is a company that buys and sells all major cryptocurrencies and furthermore provides crypto loans. They have locations in the three major cities of Australia- Sydney, Melbourne and Adelaide. These crypto-backed loans are provided to any person who holds cryptocurrency assets.
How do crypto-backed loans work?
Crypto-backed loans are loans collateralized by one’s cryptocurrency assets. This means a lender can lend cash and currency if the borrower gives them their cryptocurrency assets such as Bitcoin, Ether or Litecoin as security for their repayment. The lender holds the cryptocurrency until the tenure of the loan is completed.
The crypto-backed loans have a mutually agreed interest rate, duration, and other terms and conditions. The interest rates, however, can be fixed or floating depending upon each lender.
Why take out a crypt-backed loan?
Crypto-lending is beneficial for the buyer as well as the lender. As a lender, they can make their own terms and conditions as per their needs. As a buyer, they don’t have to lose any of their cryptocurrency assets. They are not being sold, only held by the lender. The prices of cryptocurrency might rise in the future, making holding your assets a better option than selling it.
Furthermore, a crypto-backed loan also has positive tax benefits. Since the borrowers are not selling the cryptocurrency and earning money from it, they do not have to pay tax on it.
How to apply for a loan?
The steps to apply for a crypto-backed loan are:
- Apply for the loan: Clients apply for loans through websites of financial institutions, by putting their requested loan amount and the kind of cryptocurrency they are using as collateral. There may be KYC verification needed for some type of loans involving bank accounts.
- Receive a loan offer: A loan offer is provided by the lender after approval of their request, within 90 minutes or 2 hours.
- Reviewing the loan offer: At this point, the borrower must review the terms and conditions of the loan most importantly the interest rate. The interest rates depend upon loan amount, credit history and location of the borrower. The amount of cryptocurrency assets that are required to back the loan will also be provided.
- Accepting the loan: After agreeing to the terms and completing the process, the loan will be accepted. The collateral will be sent to the institution and the loan will be processed.
What can crypto-backed loans are used for?
- Buying a house
- Diversifying investments
- Paying off debts with crypto-backed USD
- Funding personal businesses
Crypto-backed loans are slowly gaining popularity in the digital world. They are only at their initial stages as many economies have not accepted the use of cryptocurrencies. However, these loans provide greater freedom to both borrowers and lenders. Thus, this could become a booming business in the near future.