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The profitability of cryptocurrency loans is unlimited: all the pledged crypto stays on the balance, and at the same time, if the rate goes up when loaning crypto, it increases the paid-out sum.
Most investors wonder how to get a crypto loan once they have a long-term view of investments to convert them for reinvesting or purchasing other digital assets.
The crypto loan is a hybrid product of the traditional financial system in crypto financing form. The cryptocurrency loan system is straightforward: determine the amount of cryptocurrency available as collateral and acquire real funds to a crypto wallet according to the amount pledged. After the money is credited to the wallet, the client can dispose of them in any way, as much as he wants. As soon as the pledged cryptocurrency is needed, the client can unfreeze the crypto and get his collateral back by paying the Annual Percentage Rate.
To better comprehend the procedure and reveal all the nuances of crypto-backed loans, consider the example of the crypto lending platform CoinRabbit. Follow these easy steps to get a crypto loan.
Choosing the Collateral Currency
The first thing to do is to select a cryptocurrency for collateral. The platform offers over 140+ currencies occupying top positions worldwide in terms of trading volumes. Such a vast choice helps to use different currencies as collateral, makes the loan receiving process more accessible, and protects clients from unplanned drastic changes in price.
Choosing the LTV
The loan-to-value is the disparity between the quantity of the loaned money and the actual market value of the collateral’s currency. The bigger the LTV, the more loan funds will be provided, while the margin call goes up. LTV should be selected before transferring collateral. It is calculated as a percentage rate. Choose any level from the presented, only changing the collateral parameters and the loan size issued. The conditions of the loan return and LTV are clearly outlined when making the transaction. So, the LTV is a ratio between sums, then the marginal call is a situation that demands either cutting the loaned sum or adding more collateral to retrieve the balance.
Choosing the Loan Currency
After choosing a cryptocurrency for collateral, there is a choice of crypto loan currency. Almost all of them are stablecoins that provide liquidity for transactions – they are easier to convert into fiat money and with their help, it is possible to buy a wide range of assets or possessions. Nevertheless, despite its name, stablecoins have not been so stable lately, so investors should first choose an asset to buy and only then – loan currency to avoid overpayments due to changes in the rate.
Confirming the Loan with No KYC
Know-Your-Customer (KYC) is a system where a loan is issued only when specifying additional personal data. Best of crypto lending platforms offer the possibility to confirm the loan with no KYC or credit check. Only fill in a couple of necessary fields to make a deal, and all that remains to be done is just to wait to get the loan cryptocurrency within just 15 minutes. If the time to receive the loan is over 15 minutes, it looks inconvenient due to the high crypto market volatility. If the client can skip identification and receive crypto to the wallet without entering ID or bank card data, that is making it possible to disburse a cryptocurrency loan for any amount just in a few minutes.
After signing up or logging in, receive a funds transfer to any cryptocurrency wallet specified at the transaction conclusion: cold, hot, hardware, local, desktop, mobile, online, and even accounts on crypto exchanges. The range of possibilities depends on the chosen crypto lending platform. Some of the crypto loan platforms offer full availability in their service to make the user experience not only pleasant but also convenient from a technical point of view.
Making an Investment Strategy Happen
People may ask what they can do with the crypto loan received. Anything! The money received on bail can be spent anywhere – everything that comes into the wallet belongs to the owner and is at his disposal entirely:
- Add some promising assets to the portfolio;
- Strengthen an actual portfolio;
- Buy real estate or possessions;
- Pay for services in crypto.
No Need for Loan Payment
After receiving a cryptocurrency loan, there is no need to make a monthly payment – only under “Flexible Terms” – an amount consisting of borrowed funds and an Annual Percentage Rate (APR). Such a system allows accumulating payments without spending money every month. Thus, there is no need to worry about monthly calculations and invest money in income-generating assets, after which the earnings from the invested funds will cover the final payment with excess.
Getting Back the Collateral at the Perfect Moment
When borrowing crypto, it is not so much the size of the collateral amount that is important, as the calculation and exchange rate of cryptocurrencies at a certain time. For example, with a high rate on crypto loan currency, one can get much more money in return. At the same time, when paying off a high rate, the large amount has to be returned according to the change in the rate. However, there is also an optimal option: making a loan for highs and repayment for lows – this will maximize the payment sum and minimize the one-time payment and the APR, which we described above.
Keeping All the Extra Gains
Cryptocurrency as a type of investment is superior to the usual one. And here is why:
- Earn on the exchange rate difference, keeping the gap between the start and the final sum;
- Invest borrowed funds in any assets;
- If the collateral suddenly falls into liquidation, a client and his assets bought with borrowed money will remain safe, since the debt will be automatically repaid.
The profitability of cryptocurrency loans is unlimited: all the pledged crypto stays on the balance, and at the same time, if the rate goes up when loaning crypto, it increases the paid-out sum. This gives an opportunity to invest some extra funds into assets. Having any questions or doubts, try how it works, by borrowing against crypto for $100.