DeutschWhen the first brokerage portals for private-to-private lending emerged a few years ago, many banks saw little prospect of success. But the model increasingly caught on for borrowers and investors. The granting and brokering of crypto-based loans – so-called crypto loans – was basically a logical, obvious step for the world of Bitcoin and blockchain. The significant fluctuations often offer acute opportunities for which not every investor always has the necessary capital at hand. Here, loans for crypto purchases or financing in digital currencies can be a good approach. There are different types of crypto loans. Several points that are relevant for normal credit portals also play a role in this area.
Industry Enjoys Steady Growth
Worldwide, offers are emerging that are dedicated to the topic of crypto loans and either act as lenders themselves or bring providers and recipients together. The largely absent regulation of the crypto industry makes security a potential sticking point above all. Customers should therefore pay attention to details regarding possible state licenses and information on deposit insurance. Similar to crypto exchanges, which in turn guarantee capital protection against losses caused by the operators, there are also platforms in the crypto credit sector that assure deposit insurance comparable to those in the banking sector. It is therefore worth comparing carefully here. In the meantime, there are some providers that are controlled and licensed by financial supervisory authorities such as the US SEC. Here, customers are on the safe side.
It Starts with Opening a Customer Account
The comparison is useful because of the conditions. If you do not want to sell cryptocurrencies, but lend them, you will find a promising investment model in crypto loans. Platforms help to find someone who is looking for coins. Repayment often takes place as soon as borrowers have balanced their burdens. To participate in the systems, users must create accounts and provide proof of identity. Then, the cryptocurrencies intended for lending are transferred from an external wallet to the platform account. Now, funds can be granted to borrowers. There are therefore no significant differences to a normal loan between two parties. If you do not want to sell coins prematurely, you can realize additional returns with crypto loans.
Operators Sometimes Advertise with Very High Interest Rates
The most important feature for platform selection is of course the interest rate and the mentioned selection of lendable digital currencies. Between individual portals for crypto loans, there are in some cases significant deviations in both points. So if you do not only have the big coins on the market in your portfolio and want to lend them, you may have to settle for a smaller selection of possible providers. Other service providers allow several dozen coins as a loan basis on their portals. The terms for the repayment phase are often flexible, whereby the borrowed crypto sums are repaid in one go at the end of the term in individual cases. As for taking out a loan: A comprehensive check as with classic loans from the bank is not provided for by the portal operators in many cases. Brokering and lending thus come about directly after application within the automated loan systems.
Temporarily Lend Currencies to Exploit the Crypto Trend?
The alternative to crypto lending on brokerage portals works similarly unbureaucratically. For borrowers who borrow money from portals themselves, they receive immediate access to the funds after activation. Transfers to the bank account or withdrawals via special cards are often standard. Service providers often do not formulate requirements in the form of a monthly minimum repayment within the credit line. Important as a possible cost risk when depositing cryptocurrency as collateral for a loan: The strong fluctuations in the Bitcoin price and the prices for altcoins can have a significant impact on the costs. Fixed loan interest rates should therefore be preferred in comparison in order to ensure cost stability. In this way, potential users know from the outset what total costs will be incurred by crypto loans by the repayment date.
Different Technical Orientations at Provider Portals
In particular, crypto fans who want to become lenders on exchanges such as Binance should make an interest rate comparison. Some portals promise returns of ten percent or more. At any rate, significantly higher returns than with classic investments are tempting. If you urgently need to “loosen” money, crypto loans are a good way to avoid a premature sale in bad market phases. So there are good reasons for the credit model around cryptocurrencies. The emergence of the new industry was obvious. Banks do not accept digital currencies as loan collateral due to volatility. On the sometimes centrally, sometimes decentrally working crypto portals, borrowers can often choose between a range of offers, so that everyone can receive the individually suitable loan. Centralized providers are often characterized by more security and higher liquidity, which is particularly important for the protection of customer funds.
Depending on which technology decentralized loan portals use, there is a certain potentially serious susceptibility to errors – although this is generally the case, damages are ideally fully insured with centralized and regulated providers. Details on usable wallets should also be the focus of the comparison so that you can use your digital wallet.
Interest Rate Can Depend on the Amount of Coins
Finally, we will briefly talk about interest rates and deposits for crypto loans again. The interest rates offered may be staggered. For example, providers occasionally pay significantly lower interest rates from a certain upper limit of Bitcoins or Altcoins. Some portals also set clear limits for the investment for lenders. In some places, only small amounts in the single-digit range can be lent as credit, while in other portals, three-digit coin amounts can also be lent. You should also take a look at when and how interest is credited. In some cases, this is done at the end of the agreed term. If these are flexible loan products that can be terminated at any time, interest distributions should be possible on a daily basis. All in all, crypto loans are not only interesting for borrowers, but also potential lenders can generate considerable income through lending. For the future, however, lenders in particular should pay attention to the correct taxation of profits in order to avoid problems with the tax authorities.
