As technology improves, it’s no surprise that the blockchain and cryptocurrency industry also continues to move mountains – and not only in investing. Nowadays, several crypto platforms also offer cryptocurrency lending. In a nutshell, it’s the practice wherein crypto owners can borrow money from lenders by using their digital assets as collateral. And just like a standard loan, it comes with regular interest payments.
However, much like any other crypto that has come up, people still doubt its safety and legitimacy. But compared to traditional bank loans, it offers more perks. So, if you’re still unsure about trying out crypto lending, here’s a roundup of its most favorable aspects.
6 Advantages Of Cryptocurrency Lending
1. Collateralized Assets
Most crypto owners think that selling their assets is the only way to get money. However, cryptocurrency lending platforms allow them to get funds without losing their investments – they still own their assets. Because of this, you won’t need to let go of the blockchain’s protection and your hard-earned crypto assets to take out a loan. So if you have a sizable crypto investment, you’ll have the chance to make some money off them without losing ownership.
2. More Accessible Than Bank Loans
A traditional bank loan involves many visits, financial documents, and a bank account, making it extremely challenging to apply for one. On the other hand, there’s a good chance that your application will be rejected if your credit rating and annual income aren’t up to the bank’s standard. All of these factors combined make it difficult for an average individual to loan some money from a bank.
To solve this issue, some individuals are now turning to cryptocurrency lending, also known as decentralized lending, because it’s not as time-consuming and mentally draining to process. It also has lesser requirements, disregarding your credit score and bank account. It has the power to help everyday citizens get the funds they badly need when traditional loaning processes don’t even look their way
3. Time-Efficient Process
A traditional loaning process usually takes a few days and sometimes weeks to approve. This could be a detrimental occurrence because there are instances where individuals need to borrow money as soon as possible. However, when it comes to crypto lending, you won’t need to worry about the duration because most platforms approve loans within 24 hours. And although they’ll need to verify your ID, you won’t need to provide numerous documents to determine your eligibility.
And other than your ID, the only other thing you’ll need is some cryptocurrency assets that you can give the lender as collateral. Moreover, the final loan amount will be based on your current crypto’s value.
4. Loan Terms Are Customizable
When applying for a typical bank loan, you won’t have much control over the final loan terms – it will all be dictated by the bank. They’ll dictate the loan amount, interest rate, and duration. Although there are numerous banks to choose from, it’s challenging to find a massive difference between their terms because they follow similar lending standards.
On the other hand, cryptocurrency lending terms are more customizable to fit each borrower’s financial situation. For example, you can choose how long you want the loan to be active, its loan-to-loan (LTV) ratio, and what stablecoin or fiat currency you wish to receive the funds in. And for your convenience, some cryptocurrency lending platforms offer incredibly flexible payment terms, while some even offer no minimum monthly payments. Make sure your loan is entirely paid by the end of the designated due date.
And because crypto loans are linked to the blockchain, they pride themselves on transparency. As a result, all loan terms are clearly stated, so the borrower has complete knowledge of the entire process.
5. Low And Reasonable Lending Fee
Traditional banking loans typically involve large sums of transaction fees and may be cumbersome for some borrowers. Because instead of receiving the entire loaned amount, customers are bombarded with various transaction fees.
But with crypto lending, the fee structures are significantly lower in price. In addition, it typically only includes a one-time service fee, making it easier on the pocket. And if you need the money in a different currency, you won’t have to deal with exorbitant exchange rates.
6. Exceptional Safety Precautions
Although it’s normal to assume that money is safe in a traditional bank, it’s essential to know that some banks were involved with significant money laundering scandals. Moreover, banks are governed by human beings, which means human error is unavoidable.
On the other hand, some individuals have doubts about cryptocurrency because it’s new and volatile. But because of its relation with blockchain technology, cryptocurrency lending rewards borrowers and lenders with utmost security.
Sometimes, you might be in a sticky situation and need extra funds. Still, if you don’t want to sell your crypto assets, crypto lending is an excellent alternative you should consider. It’s an inexpensive and fast way to get money without going through the hassle of traditional bank loans.
However, just like other lending options, you should always do in-depth research before trying it out. But don’t worry because cryptocurrency lending still moves within blockchain technology, so your security will always be prioritized.