Updated: Apr 10, 2020
Cryptocurrency loans are one of the latest and newest types of alternative financing, which allows users to borrow in cryptocurrency or back their loans with the help of crypto assets they already own. You do not need to have good personal credit or even a bank account to acquire a crypto loan, in some cases. However, you need to do your homework or you might end up with higher than normal rates. It is also possible that it may take longer than usual for you to get your funds.
To get the best collateral options and rates, you must understand various options. This guide will discuss the top five options for cryptocurrency loans.
What Does LTV Mean?
Before we divulge into the best crypto lending platform, it is important to understand what LTV means or loan-to-value ratio. This ratio refers to the ratio of the loan amount and collateral market value. Lower LTV ratios are always better since these are less risky. Your crypto asset in a lower LTV ratio is not likely to be liquidated in the event of a market fall to secure the lender’s investment.
Conversely, higher LTV means that you need to act quickly in case there is a significant change or an extraordinary event in the market. You will get an email notification in case there are critical changes in the collateral value. If you can repay the loan or add additional collateral, your crypto assets shall remain safe. If not, you may lose your assets completely.
Nexo is headquartered in Switzerland and has earned a name for itself as being one of the global leaders in crypto lending. It offers users access to instant loans or an instant line of credit, when they deposit a crypto asset, including Bitcoin into their Nexo wallet. Loans are paid out in a multitude of various cryptocurrencies, such as Ethereum, Bitcoin, XRP, BNB, and Litecoin.
To access a Nexo loan, users need to first transfer their crypto assets into their Nexo wallet. Instant cash can then be accessed in fiat currencies such as the Euro, the US dollar, and Japanese yen. You can borrow in more than 45+ fiat currencies while earning daily interest on your idle assets. All loans are secured by the market value of the stored crypto assets in your Nexo wallet.
You can borrow loans from $500 to $2 million
Terms can be as long as a year
Interest rates start from 5.9% per year (APR)
There is an LTV of 20% to 50%
There is a simple four-step process to attain a loan from Nexo. It includes signing up for a secure Nexo wallet and depositing cryptocurrency in it. There are no credit checks required for getting a loan from Nexo.
The company has already issued over a billion dollars in crypto loans since its inception. They also offer various other financial services, including interest-bearing accounts that can utilize your idle cryptocurrencies.
2. SALT Lending
SALT Lending is based out of Denver and is another popular platform for Bitcoin and other crypto loan origination. The platform claims to be the original blockchain-backed loan. You can get loans in Bitcoin, Litecoin, and Ethereum through SALT (Secure Automated Lending Technology).
An LTV ratio of 30 - 70% is offered by this lending platform. However, the best part about this lending platform is that they offer comprehensive insurance coverage over your collateral. There are not many crypto lenders who can say that.
Currently, eligible collaterals include Bitcoin (BTC), TruUSD (TUSD), USD Coin (USDC), Bitcoin Cash (BCH), Ether (ETH), Litecoin (LTE), Dogecoin (DOGE), Dash (DASH), Paxos Standard Token (PAX), and PAX Gold (PXG).
The company is expanding its lendable areas to countries like Brazil, Hong Kong, Bermuda, Switzerland, the UAE, and Vietnam in addition to the United States to offer people and businesses a chance to attain financial freedom, which comes through the accessibility to instant fiat currency through blockchain assets.
SALT has another benefit of providing near-real-time monitoring of your unique crypto account. It also provides certain specific guarantees that a customer’s assets are there for them whenever they need to access them.
Loans start from $5,000 and can go up to $100 million, depending on the value and nature of your crypto assets
You need to purchase a SALT membership to be eligible
LTV of 30% to 50%
APRs start from 5.99%
The SALT algorithm calculates the loan-to-value ratio (LVR), which accounts for calculating volatility in collateral. LVR is dynamically calculated and is based on the current value of crypto assets being held as collateral. SALT aims to consciously maintain an LVR of 80%, which means that collateral should always be worth at least 80% of the entire borrowed amount.
BlockFi is based out of New Jersey and offers financial products, which allow cryptocurrency holders to get more done with their digital assets. BlockFi has customers from all around the world, including 47 U.S. states. The main business of this company is to offer interest-earning accounts and low-cost USD loans backed by crypto.
You can stake Bitcoin (BTC), Ether (ETH), or Litecoin (LTC) as collateral and receive USD in return. You can use BlockFi crypto-backed loans to do anything from paying off your credit card debt to using it for purchasing a home. Businesses and enterprises turn to BlockFi to help them with business expansion and payroll financing.
The company offers a maximum of 50% Loan to Value (LTV) ratio on all crypto assets, which is quite lower than what other lenders have to offer. This works in favor of a borrower as it ensures that your crypto assets would not be sold if there is an unexpected market situation.
On BlockFi if you are looking to take out a $25,000 loan, you would be required to put up about 10.06 BTC in collateral, which is worth about $50,000. Interest rates on the platform start at 4.5%. However, the minimum loan amount and origination fees may apply. Also, most crypto loans offered are for 12-month loan durations with options to prepay or refinance at the end of the term.
You can borrow from $5,000 to $100,000,000
Up to 50% LTV
Rates start at 4.5%
Borrowers must have $4,000+ in cryptocurrency
Currently, the company does not offer crypto loans to residents of Hawaii, Vermont, Nevada, and South Dakota.
4. Unchained Capital
This platform is another provider of Bitcoin and crypto and loans. It is based out of Austin, TX and follows a quick 3 step process for allowing a loan. Users can approve up to $1,000,000 in crypto loans in a single day with the easy process without the hassle of a credit check.
Unchained Capital takes a unique and favorable approach to custody and securing borrower loans. They have successfully developed a multi-signature model of storage, which eliminates the single point of failure model that is rampant in crypto custody.
Three independent key holders collaborate to protect a borrower’s collateral. This collateral is stored in multi-signature addresses that require 2-of-3 keys to spend. The keys are held by borrowers with Unchained acting as a third party key agent. In this entire process, there is never any point in time where one person or organization is allowed to act as a single point of failure.
Attaining a crypto loan from Unchained Capital is the way to go if you want to keep the security of your crypto at the forefront.
Offers both personal and business loans of $10,000 or more up to $1,000,000
Terms range from 3 to 60 months
LTV of up to 50%
APR from 10.91% to 14.22%
Unchained Capital only offers crypto-secured loans that are backed by Bitcoin as collateral.
5. Celsius Network
This is perhaps one of the most popular cryptocurrency lending platforms with an average annual statistic looking like 40,000 downloads, $50 million in coin deposits, and a paid out maximum interest of 7.1%. Users can easily apply for a stablecoin or USD loan using their cryptocurrency assets as collateral with rates as low as 4.95% APR. Three LTV options give users the freedom to select the type of risk that they are comfortable with.
Currently, only 6 different cryptocurrencies are supported by Celsius Network, including Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, and DASH.
Rates from 5% to 12%
Terms from 6 months to 3 year
LTV ranges from 25% to 50%
The best part about Celsius Network is its nifty calculator, which allows you to select the loan terms that you want. It then back calculates the required collateral for those terms. There are no fees involved, such as termination, prepayment, or transaction. Additionally, the interest that borrowers pay on their crypto loans is distributed among Celsius wallet users every week.
Loans using cryptocurrencies as collateral for borrowing in stable coins or USD are becoming very popular. However, you must always understand your risks. The amount you borrow depends upon the value of assets held as collateral. Since crypto-assets are highly volatile, these values can fluctuate. It is recommended to always go with a lower LTV to protect your interests and crypto-assets.