Have you ever considered getting a crypto loans without collateral? The blockchain is growing rapidly and a lot of things are evolving in the blockchain ecosystem. Individuals can buy a coin, and lend to a borrower with a fee or an interest, instead of just holding the coin till the value increases.
This is another perspective of earning cryptocurrency as a lender other than trading or investing in cryptocurrency.
Have you ever wondered if taking crypto loans without collateral is possible?
This article entails what a crypto loan is, how it works and if it is possible taking a crypto loan without collateral.
What Is A Crypto Loan?
When we talk of crypto loans, what comes to your mind?
I’m sure the first thing that comes to your mind is- giving out a cryptocurrency to someone for a fee or an interest, right?
Well, you are wrong! That is not what a crypto loan is.
A crypto loan is similar to crypto lending which is explained in a layman’s terms as a cryptocurrency that is borrowed, and expected to be paid back with an interest.
A borrower can take a loan of 2 BTC and pay it back with an interest of 2 – 10% depending on the lending platform he took the loan from.
We have a lot of lending platforms both decentralized and centralized. Most people utilize the centralized lending platform more than the decentralized lending platform because; getting a loan from a centralized lending platform is very easy and more convenient than getting it from a decentralized lending platform.
How Does A Crypto Loan Work?
Crypto loans work similarly to how the traditional banking or loaning platform works. There are many disadvantages of traditional loaning or lending platforms, and the blockchain has a solution to fix those dilemmas.
The traditional loaning platform might require a credit score or too many documents and collateral before granting a loan request.
But a crypto lending platform doesn’t require documents or credit scores, it only requires collateral.
Traditional lending platforms require collateral like houses, cars, land e.t.c
Crypto lending platform “decentralized or non-decentralized” only requires crypto as collateral.
This works in a way that, if you have bitcoin but you need Ethereum to pay for NFTs minting fee or as the case may be, and you don’t want to sell your bitcoin; you can use your bitcoin as collateral to get Ethereum.
Most crypto lenders make a huge amount of money giving loans to individuals.
A Step-By-Step Guide To Get Crypto Loan
If you don’t know how to get a crypto loan or you are a complete beginner, follow these steps below:
- Find a platform that offers crypto loans to users. Choose the one that suits you best. Examples of platforms that offer loans are Binance, Bybit, OKX, Compound Finance, Roqqu e.t.c
- Sign up on the platform. Most of these platforms have great interfaces, and are beginner friendly with a smooth registration process.
- Choose your desired loan amount and the platform will calculate the amount of crypto to be used as collateral, and also the interest to be paid will be unveiled.
- Deposit the appropriate amount of crypto required as collateral and apply for the loan. After that, the loan will be given in less than a minute or more depending on the platform and your browsing speed.
However, most platforms don’t charge interest.
Do All Loans Have Collateral?
A lot of people who want to get involved in taking a crypto loan, often ask themselves, do all loans have collateral?
There are platforms that offer crypto loans to individuals without collateral, but there are high risks attached.
Looking out for a platform that offers crypto loans without collateral might make you fall prey to scammers, and there are some things you need to know about the crypto loans platform offering loans to people.
Firstly, understand the fact that cryptocurrencies are so volatile, they can move upward or downward in the twinkle of an eye.
You might borrow an asset and before or after it lands in your wallet, it decreases or increases. This is the real fact about cryptocurrency.
Can You Get A Secured Crypto Loan Without Collateral?
There’s no assurance of getting a secured loan without collateral because it is not easy to lend crypto assets to an anonymous user.
This to say, be careful of platforms that prove to give secured loans to users without collateral, because most of them might play out to be a scam. Make sure you don’t give out information that will leave you and your finances at risk!
In other words, getting a secured crypto loan without collateral might be very expensive in the long run. The interest rate might be very high!
If you are looking forward to getting crypto loans, make sure you follow the procedure of getting a crypto loan carefully, and read and understand the terms and conditions of the platform that you want to get loans from.
Also, make sure you are capable of paying back your loan before endorsing taking a crypto loan.