BEST LENDING PLATFORMS FOR CRYPTO LOANS

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One of the benefits of investing in cryptocurrency is the ability to use your crypto holdings as collateral for a loan, even if your holdings are relatively small. In traditional markets, a similar practice is called securities-based lending, but it is typically off-limits to all but high-net worth clients of private banks and large financial institutions.

Crypto loans are much more accessible, and they offer “hodl” investors a way to achieve liquidity from their investment without selling it. In this article, we’ll introduce some of the best DeFi and CeFi crypto lending platforms. If you’d like to learn more about the categories of loans and how they might affect your taxes, read our blog “Crypto Loans and Your Taxes.

Cryptocurrency Loans Explained

Cryptocurrency loans operate similarly to a loan you would get at a bank. The bank receives funds from your savings account, which it then lends to borrowers. The bank offers you interest on your savings account and then charges borrowers a higher interest to earn a profit.

Two blockchain-related technologies make these phenomenal interest rates secure and risk-averse. First, smart contracts guarantee crypto loans are paid back, even without vetting the borrower’s credit. Smart contracts are codes on the blockchain that can perform certain functions, such as holding loan collateral in an escrow account.

Second, stable coins allow you to earn great interest rates without being exposed to the high volatility of Bitcoin. Stablecoins, such as USDC, DAI and Tether, are cryptocurrencies always equal to $1. These cryptocurrencies are able to maintain a stable value through USD reserves, arbitrage and complex code backed by cryptocurrencies.

How to earn on crypto loans?

So, for individuals, the main challenge is depositing fiat to crypto, so if you are considering saving in USD, you might as well take the opportunity to save in USDT as this would give higher interests than banks. So, any platform offering direct fiat deposit and conversion should be considered more profitable than using OTC to send USDT to the platform. In CeFi, Binance has many assets for staking and also the security of SAFU funds so most users can directly use it. In DeFi, COMPOUND is the better choice for individuals as they also get COMP tokens. Also, CABITAL, VAULD, etc offers direct deposit of FIAT and good yields on staking. For Institutions, choosing a platform should depend on the legal standing and in this regard, B2C2 & CABITAL is the better choice for CeFi and AAVE for DeFi. CABITAL is doing everything to get the related regualtory approvals while B2C2 is one of the largest market maker owned by SBI Capital. AAVE is the next generation of DeFi to invest in supporting the highest no of Crypto assets for asset collaterilization.

What are the main risks in the crypto lending process?

Crypto lenders earn interests in a few ways which are – 1. Borrowers pay high interests to Lenders to get loans for getting USDT for trading and this can well be over 30-40% annually. 2. Lenders can directly contribute to CeFi projects and they invest in other DeFi or lend to borrowers while lenders get a fixed yeild. 3. Lenders can directly contribute to USTD pools in DeFi and the DeFi allows borrowers to borrow against collateral. 4. Lenders can also put their USDT in the Binance (or other Crypto exchange) leverage pools and depending on market trends can earn profits, but this is strictly for technically equipped personnel. Risks- 1. DeFi hacks – Celcius had a good reputation but the recent BadgerDao hack exposed that they deploy user funds directly onto other platforms using Metamask for earning yield. While the process itself is normal but using a Metamask wallet exposed it to the front end hack suffered by Badger DAO. 2. In Sept, 2021 COMPOUND accidentally gave away 280K COMP tokens due to a pushing ahead with a bugged update, the reverse might also happen and users might loose funds due to vulnerabilities. 3. Besides backend and frontend vulnerabilities, smart contract vulnerabilities too can cause users to lose funds. 4. Last, but not the least if the yeild is too good to be true, it could definitely be a scam so do a through background check about the CeFi or DeFi before investing.

Crypto Lending Platforms: What are they, and How do they work?

As now you are aware of the crypto lending platforms, you must be able to distinguish different types of crypto lending platforms. For example, CeFi and DeFi are the two distinct platforms for lending cryptos.

  • CeFi platform:

    In most cases, Centralized Finance platforms or CeFi act as intermediaries in the crypto lending process. For the loan duration, a centralized cryptocurrency lending platform would take ownership of lenders’ assets and borrowers’ collateral. Furthermore, a centralized crypto lending side would necessitate a KYC process, removing anonymity.

  • DeFi platform:

    On the other hand, Decentralized Finance platforms or DeFi offer a decentralized method of crypto lending. DeFi platforms use smart contracts to carry out lending procedures. Most importantly, DeFi lending platforms might provide complete automation of the lending process as well as contract execution if the set conditions are met.

BEST LENDING PLATFORMS FOR CRYPTO LOANS

1. BlockFi

BlockFi is a huge CeFi player, based and regulated in the U.S. and backed by large financial institutions such as Valar Ventures, Winklevoss Capital, Galaxy Digital, Susquehanna, Akuna Capital, and Fidelity. Motley Fool describes BlockFi as a good fit for beginner and intermediate investors looking to bridge the gap between traditional finance and crypto.

2. YouHodler

Launched in 2000, YouHodler is a Swiss-based fintech company that lets its customers take out crypto-backed fiat, crypto, and stablecoin loans. Loan terms range from 30 to 60 days, interest rates start at 3%, there are no additional platform charges, and applications are processed almost instantly.

  • Minimum loan amount is $100
  • LTV goes up to 90%
  • 24/7 support via live chat and email

BtcPop allows for a quick Bitcoin income by getting loans from other members or loaning it yourself. It offers easy-to-use services that result in your getting the assets you need. They deal with multiple currencies and even offer new rising altcoins.

  • Lenders can withdraw at any time
  • Deposit limit: No deposit limit
  • Accepts multiple cryptocurrencies

The Celsius Network platform offers their users curated services that are otherwise unavailable through traditional institutions. You can sign up for an instant Bitcoin loan with no credit check. It lets you earn interest on crypto and at the same time borrow against it.

  • Platform charges: No fees
  • Loan duration: 6 or 12 months terms
  • Accepts multiple cryptocurrencies

5. CoinLoan

CoinLoan has a lot to offer to any investor with significant crypto holdings and eager borrowers. It challenges traditional financing by combining cryptocurrency and crowdfunding, allowing individuals to borrow funds with a loan-to-value (LTV) of up to 70%. While those looking to gain passive income can get double-digit returns both by funding investments with stable and fiat currencies.

  • Loan duration: from 7 days to 36 months
  • Lenders can withdraw money at any time
  • Platform charges: No fees

6. Nexo

Nexo offers one of the safest ways to loan crypto. All accounts are insured by digital asset security expert BitGo, allowing all transactions to be conducted safely. You can view Nexo as the most secure platform that allows you to instantly borrow 45+ cryptocurrencies. It further lets you earn Nexo Bitcoin interest in idle assets.

  • No deposit limit
  • Interest rate: 5.9% per year APR
  • Accepts multiple cryptocurrencies

7. Binance

Binance is a legitimate platform that provides primarily Bitcoin purchases while also dealing with lending cryptocurrency at a very favorable BTC price. You can choose from a wide suite of crypto options. The platform also lets you hold your funds and gain interest, and make flexible deposits at your convenience. Either way, Binance helps you make good use of your assets.

  • Annual interest rate 8.90%
  • Deposit limit: No limit
  • Accepts multiple cryptocurrencies

8. ZebPay

ZebPay’s new offering allows users to lend their coins to the company and receive returns based on the coin and the length of time it is lent for. The ZebPay Lending Platform pays out returns on customers’ crypto investments if they lend out certain cryptos, allowing them to earn a passive income in addition to the gains made from rising crypto values. The loan tool will handle Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and Dai (DAI) when it launches (DAI).

Conclusion

For various reasons, people who are new to the crypto realm will want to figure out “What are top crypto lending platforms?” However, it’s crucial to remember that crypto lending isn’t all that dissimilar from regular lending, though with some key differences. For example, in the loan process, crypto lending platforms provide complete freedom from banks and other entities.

Even if crypto loan platforms are popular and offer attractive interest rates, it is crucial to examine all options thoroughly. You must review each crypto lending platform on this list and analyze the features that crypto lending platforms must-have. However, in case of a dilemma, you can always hire professional solutions at your service.

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