In a similar way to traditional bank loans, cryptocurrency Bitcoin loans usually involve two parties, namely a lender and a borrower. Crypto borrowers can use their digital currency assets as collateral to take out loans from lenders and earn interest at a rate agreed by both parties. A Bitcoin loan simply means the digital currency being lent is BTC.
Borrowers who take out online Bitcoin loans are required to pay back their loans within the timeframe agreed with the lender. Here is how it works: Bitcoin lenders deposit an amount of BTC they want to loan out and wait to reclaim their Bitcoin (with interest) when the loan matures.
Crypto Bitcoin lending websites
Several cryptocurrency lending platforms are available in the industry today with YouHodler, BlockFi, and Celsius being the most prominent examples. Different lending companies have different rules governing their Bitcoin loan services. If you are a borrower, you need to search for the trusted lending company that offers the best rates for you to take out a loan.
Recently, a study by Global Market Insights predicted that the crypto lending market is poised to skyrocket after the Covid pandemic. The crypto industry has been very resilient to the economic disruption brought by the pandemic. A lot of HODLers are beginning to realize that their holdings could earn them a significant amount of interest if they lend them out.
Bitcoin miners can seek crypto loans to fund their operating expenses without having to touch their crypto stash. As of 2021, the overall market value of funds invested in DeFi stands at around $50 billion.
Here is how to get a Bitcoin loan
To borrow BTC instantly, you will need to find the best lending site such as YouHodler, and create an account. It takes only a few minutes to create a free account with YouHodler. While some lending sites do not require verification, other lending platforms may ask you to verify your identity using your passport, driver’s license, and/or other relevant documents. Try to choose a crypto lender with competitive rates as some rates are over-inflated.
Having created and verified your account, you will need to familiarize yourself with the terms and conditions of the loan deal. For the most part, the duration is 1 year. That said, you could get an instant Bitcoin loan and short-term offers as well, depending on the lending website.
Once you understand the terms, you can proceed to lend your funds. With peer-to-peer lending, crypto investors lend their money directly to borrowers to earn interest.
Crypto lending rates
Your return on investment (ROI) will depend on the lending website you choose. All lenders will set their own level of ROI and risk. You may want to sign up for multiple sites to diversify your portfolio and minimize your risks.
The typical lending rate for stablecoins is about 10% to 18% while that of regular crypto coins is 3% to 8%.
To maximize your returns, it helps to select a platform that suits the coins you are holding.