Loans allow you to borrow cryptocurrency at interest by providing collateral in another cryptocurrency.
When can this be useful? It's convenient when you have an asset you don't want to exchange for another, but you need access to a different asset for a certain period of time.
Example 1: You have Bitcoin, but you urgently need USDT stablecoin because you don't have any cash dollars (your salary hasn't arrived) to buy a laptop, and you don't want to sell your BTC. In this case, you can provide BTC as collateral, receive USDT in return, purchase the laptop, and when your salary arrives, repay the USDT with interest to get your BTC back.
Example 2: You have BNB, but you want to speculate on the spot market using BTC without actually buying it. You deposit BNB as collateral, receive BTC, and you can now trade BTC on the spot market or use it for other personal purposes. To retrieve your BNB, you need to return the borrowed BTC with interest.
Benefits of Crypto Loans
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No need for selling: Borrowers can borrow money without selling their cryptocurrency.
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Flexibility: Crypto loans can be done in multiple currencies and assets, providing borrowers with choices.
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Accessibility: The loans are available worldwide and can be easier to obtain than traditional loans because they don't require a credit check.
Risks of Crypto Loans
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Market fluctuation: Decreases in market value might cause a substantial decline in collateral values, resulting in liquidation.
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Overcollateralization: Borrowers must lock up significant amounts of assets to obtain small loans.
Cryptocurrency Exchanges Supporting Loans
- Kucoin (Popular exchange, operating since 2017. In our opinion, Kucoin is the crypto exchange with the most user-friendly interface we have ever seen.).
