Bitcoin loans or crypto-backed loans are becoming more and more popular these days. Especially today when most of the coins have lost so much in value and Bitcoin is trading around 4,000 dollars. In this market only a fool would like to sell their digital assets. But what options do cryptocurrency holders have if they need to cover some urgent expenses?
Bitcoin loans as an alternative to lending
Bitcoin loans or crypto-backed loans are loans backed by cryptocurrency assets. To get a loan, you simply need to provide cryptocurrency as collateral. Ethereum, Ripple or any other cryptocurrencies are usually accepted. No credit checks, no extensive documentation, quick verification, absolutely hassle-free.
Similar to regular loans, when a borrower repays their bitcoin or Ethereum loan, they get their crypto assets back. Pretty straightforward, right?
Since crypto assets fluctuate, lenders are protected by margin calls, meaning that borrowers must increase their collateral if the value of the collateral drops sharply.
Security is always a major source of concern in crypto, therefore all of the crypto assets are safely kept in cold wallets until the borrowers repay their loans.
Crypto-backed lending has been growing
It is surprising that bitcoin loans have not taken the industry by storm yet. Even though many people still don’t quite realize the potential of crypto-backed loans, there are numerous companies already providing such services and there is a growing competition in this industry.
Bitcoin loans save time and most importantly – money.
Firstly, selling your crypto today means losing all your upside potential. Especially today, selling in such a market simply makes no logical sense. Secondly, when banks that hold the vast majority of our money receive a payment from a crypto sale, they often freeze such accounts. Unfreezing them takes time and nerve. Besides, all the time wasted on sorting out all of these things mean that your income from selling crypto will be subject to income tax and other taxes. Crypto-backed loans help to avoid all of this in just a few minutes.
Where do people spend the money?
People get crypto-backed loans for a number of reasons, but the most popular seems to be purchasing real estate, paying off credit card debt and student loans or covering travel expenses. This is particularly the case for Millennials who according to Adweek and the survey by Eventbrite travel more than any other generation and “72 percent of them claim that they would like to increase their spending on experiences rather than physical things”.
Another group for bitcoin loan companies is businesses where entrepreneurs are borrowing money to fund their startups or other business initiatives.
HODL Finance is the European digital lending company. HODL Finance issues loans backed by cryptocurrency and other digital assets. Founded by the shareholders of the peer-to-peer lending platform, Savy, HODL Finance now serves clients around the world.