Loans mean that you can 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, buy the laptop, and when your salary arrives, you repay the USDT with interest and 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 now you can trade BTC on the spot market or use it for other personal purposes. To get your BNB back, 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 a multiple currencies and assets, providing borrowers with choice.
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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.
Crypto Exchanges Supporting Loans
- OKX (OKX is user-focused first and foremost. They relied on maximum convenience and speed of the exchange, and OKX does this very well. In addition, OKX has its own and very convenient decentralized wallet to store tokens securely.).
How to get started with crypto loans
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Choose a platform: Pick a trustworthy exchange or DeFi platform that enables you to borrow cryptocurrency.
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Confirm your identity: Complete KYC verification if required.
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Deposit collateral: Deposit the currency you wish to use as collateral in your account.
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Apply for a loan: You are able to stipulate the amount, collateral and terms of the repayment.
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Get paid: Funds will be directly transferred to your wallet once approved.
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Monitor Collateral Ratio: Monitor the collateral to loan ratio to avoid liquidation.
Crypto loans are transforming the financial landscape by providing a decentralized, efficient, and flexible way to borrow and lend assets. Crypto loans come with some clear benefits, but users have to weigh the risks such as changes in the market and the ability to be liquidated. In reality, it’s a great and transparent tool that can help in many life situations — the main thing is to use it wisely.
