Cryptocurrency Loans – How Do They Work?

Crypto loan or lending is the procedure of giving your Cryptocurrency to someone and taking a regular interest payment from them. The payment is usually provided in the form of Crypto. And, you can choose any frequency between – daily, weekly, monthly, and yearly.

When it comes to lending Cryptocurrency, you can opt for two different options. These are –

• Centralised, and
• Decentralised.

Although they’re fundamentally different from each other, they do offer an excellent rate. For example, you can get more than 20% interest with either of them. Also, you can ask for quite a heavy collateral from your borrower before lending your Cryptocurrency.

And, before we move on, there’s no need to invest in any unique platform to take care of each of these proceedings. If you’re already working with a platform like BitAlpha, you can use it to lend your Crypto to someone else. And, taking interest can be done in the same way.

How Can You Get A Crypto Loan?

If you want to get a Crypto loan, you’ll need to create an account on a centralised platform. It can also be done by connecting to a decentralised wallet. Anyway, once you’re done with it, you can select whatever collateral you want to deposit.

If you’re done with it, you can select the type of loan and the amount you want to borrow. It will vary or depend on the collateral you have deposited and the Crypto you want to get.

Now, let’s move onto the process of completing the transaction.

To do it, you’ll need to deposit the collateral amount in the digital wallet of the platform. Once you’re done, you will get the currency in your account right away.

What About Lending, Though?

In the previous section, we’ve talked about how you can borrow the loan. Now, we’ll talk about how you can lend your accumulated Cryptocurrency to someone else.

If you want to become a lender, you’ll need to create an account and log into it on a platform. It should be done by providing proper information regarding you or the lender.

Now, you’ll need to select a supported Cryptocurrency module and type in the amount of funds you want to send there. Click on “submit” to complete the procedure.

• If you’re using a centralised platform, the interest will be reimbursed with or in kind of a native coin. Hence, once you get it, you can liquify it however you want.
• However, on a decentralised platform, it’ll all be a little different. In this aspect, you’re going to get the money both in the native coin system and in bonus.

Is There Any Risk, Though?

Crypto lending, in essence, is quite a headache-free procedure. However, if you’re not careful enough, something might get messed up, like –

1. It’ll Be Unregulated.

Unlike the traditional loaning system, a Crypto lending procedure will be unregulated. Hence, you might not be able to get help from the government if someone steals your money. Also, it doesn’t come with too much of a protection for the borrower too.

2. Highly Illiquid.

Even though you’re getting Crypto from someone through lending, you won’t be able to use it right away. In some cases, you might have to wait for a day or two before accessing it. This can make it difficult for someone who’s intended to make an investment with that currency.

3. Extremely High Interest Rate.

The interest rate of a Crypto module generally depends on the person and the currency you want to get. And, considering both of them, the rate you might have to follow can go over the rating of 13%. Hence, it might not be an ideal scenario for most borrowers.

Should You Go For It, Then?

Taking a Crypto loan can be beneficial for both the borrower and the provider. The former can take it from someone else and use the same to invest in a Crypto with higher potential. And, the latter will get additional money in a periodical format. Depending on the interest rate, you’ll get quite a lot of cash from them. So, there won’t be any need to make any additional investment or anything as such anymore. Sounds pretty great, right?

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