In this article, we will consider the available options for a loan in bitcoins and crypto-lending, the nuances and pitfalls that you need to pay attention to so as not to run aground and not be left “with a nose”.
When you may need to borrow in bitcoins?
Cryptocurrency lending services today have an audience of over 200 thousand users and are beneficial primarily to those who spend and earn money in cryptocurrency assets. The most commonly used cryptocurrency loans are traders, as well as miners.
It is very important for a trader to have a good turnover of funds. It is the turnover that directly affects his earnings. A trader has the opportunity to invest his cryptocurrency assets in the expansion of the cryptocurrency portfolio, by purchasing new coins; he can invest in interesting ICO projects or invest in mining.
Arbitration or sub-lending
The borrower has the opportunity to lend his assets on more favorable terms for him than those on which he lends himself. In this case, making tangible profits is possible only if there are a significant number of closed transactions that are closed by bots, as well as having impressive volumes of loans issued.
The scheme is rather risky, since the object of sub – lending may not return the loan and the intermediary will be left with a nose. But still, this option is working and is widely used in practice
Lack of bank alternatives
Often, the interest rate for lending in cryptocurrency is in the region of 20-25% per annum. That is why such loans are profitable to take exclusively for a short term. And, despite such a high rate, many users, having received a refusal from the bank, agree to such conditions, since this is the only way and the only way to get a loan for purchases, business or other purposes.
Scheme of work
In terms of formality, a loan issued in bitcoin or cryptocurrency is not a traditional financial service. This is called P2P lending. In other words, the issuance of loans between users using specialized Internet resources.
Such services act as a guarantor of security and transactions, charging a commission for services. At the legislative level, Person2Person-lending is not a loan, but acts as a loan, because it is issued by a private person and not by a financial institution.
Accordingly, to get a loan in bitcoins, you do not need to meet high requirements and their number is less than in traditional lending.
Services work according to a simple scheme:
- Verification. The borrower is obliged to register in the service system, fill out a profile to the maximum: his photo, links to his social networks, passport data, supported by document scans, bank statements, job data, contact information (phone number, e-mail address), photo bank card. After checking the data, the service connects the user to the system. There are times when the service asks for login data for Internet banking in order to transfer all available data to creditors in the event of a loan default.
- Loan agreement. After completing registration, data confirmation and verification, the borrower has the opportunity to create an application and publish it in the lists for possible fundraising. You can get them in bitcoins or any currency supported by the system, independently determining the amount of the loan body, as well as the interest rate and repayment terms. If the lender, looking through the lists of potential applicants for receiving funds, agrees to the terms proposed by the borrower, he can transfer the required amount to the user. Or offer alternative credit terms. Based on the conditions that are negotiated by the lender and the credited, a transaction can be made.
- Distribution of risks. In order to insure itself against possible losses, a borrower’s lending scheme is often used, when a loan is financed by a group of lenders. With an impressive request for credit funds, the number of users carrying out financing can reach tens of people. Among other things, each of the borrowers has its own rating, formed according to the principles of credit history used in the banking sector, and depends on the number of closed and open loans, compliance with maturities. Higher-rated users have more opportunities to get a larger loan amount. Some services provide for the possibility of insuring the transaction against possible non-refund of funds. These deals are a little more expensive, but lenders can sleep well.
Where to get loans
So, it’s time to find out where a simple user can get a loan in bitcoins. The service for obtaining a crypto loan is available on Youhodler in a special Lending section , which is organized on the basis of P2P lending. The only and main condition is the use of loans exclusively within the framework of exchange trading on the exchange itself. At the same time, the cryptocurrency exchange insures the person acting as the lender, and also sets limits for the borrower, not allowing all credit funds to be spent from its account.
For the first time highly specialized crypto credit platforms emerged back in 2012. Since that time, they have been popularized and have gained a pretty good number of permanent members of the system. Many, of course, could not withstand the competition and were forced to cease to exist for one reason or another. Mainly due to problems with payments and regulation of activities.
Crypto-credit Internet services announce that getting a loan in bitcoin is possible for absolutely everyone. But practice shows that funds are more willingly issued to residents of the United States of America and immigrants from EU member states. For residents of the Russian Federation and post-Soviet countries, one of 8-10 applications receives approval, while the loan rate is significantly higher than for European users.