Loans in cryptocurrencies 

2022-10-11 Patryk Chodyniecki

Loans in cryptocurrencies 

Cryptocurrencies are gaining ground in the financial sector, including cryptocurrency loans. Many people know that cryptocurrencies can be bought, sold, traded on an exchange, and stored, but there is still relatively little talk about cryptocurrency loans. In the following article, we will cover this topic.

Currently, no company in Poland offers cryptocurrency loans, but we can find them in foreign markets. Lending against cryptocurrencies is an interesting new topic in the cryptocurrency industry that is worth discussing in more detail.

Loans in bitcoin are only short term.

Companies that offer loans against cryptocurrencies tend to do so for the short term. As a rule, repayment is made within a few days, up to a maximum of a year. Some companies offer repayment in such a way that interest is paid for the first few months, and a single larger payment is made towards the principal at the end of the term.

Currently, bank and para bank loans have different RRSO’s (real interest rates) and the total cost of credit to the consumer. The APR is a percentage of the total loan amount per annum. It is an extremely important element of any loan, as it allows offers to be compared between banks, SKOK’s, and non-bank lending institutions.

The annual percentage rate of charge takes into account not only the percentage of the loan but also all commissions, fees, and the cost of additional services required to obtain the loan. The annual percentage rate of charge depends on the duration of the loan and the institution that grants the loan. Unfortunately, it is possible to come across legitimate loan companies with an APR ranging from around 20% to even 2000%! For this reason, it is a good idea to carefully screen the loan offer and the company.

Bank loan or loans in cryptocurrencies?

At the moment, in order to determine whether it is more profitable to take a cryptocurrency loan or a bank/para bank loan, we will need to analyze a few factors:

  • the type of collateral (i.e. currency),
  • the repayment period,
  • the amount of the loan,
  • the borrower – individual or company.

Currently, most cryptocurrency companies offer interest rates between 10% and 20%. As you can see, this is a highly cheap offer compared to almost all banking and para banking institutions. Furthermore, the very problem of enforcing a cryptocurrency debt does not mean contacting a debt collector.

How do cryptocurrency loans work?

We take out cryptocurrency loans against the pledge of other cryptocurrencies. If we commit and repay it regularly, our cryptocurrencies are waiting to be collected by us in a special and secure space. Many companies that provide loans against cryptocurrencies employ numerous safeguards for the stored funds.

If we cannot make the loan repayments, then our cryptocurrencies pass to the company that gave us the loan.

Example loans in cryptocurrencies : We borrow USDT 1000

We borrow USDT 1000 and pledge 0.0949 BTC. If we do not repay the required USDT 1046,80000000 (for example for a loan of 90 days), the 0.0949 BTC goes to the account of the exchange where we borrowed.

Lending in the cryptocurrency sector is also of interest for another reason. Cryptocurrency companies do not analyze our financial history through the Credit Information Bureau and the BIGs. Taking out a loan against cryptocurrencies will not be recorded anywhere.


AboutPatryk Chodyniecki