All You Need To Know About Crypto-backed Loans
Crypto-backed loans are a perfect example of futuristic finances. Crypto backed loan is a loan given to a borrower in which the collateral for the loan is the cryptocurrency assets. The idea for crypto loans started as crypto-investors were not able to obtain loans backed by the cryptocurrency assets and instead had to other loans with raging interest rates.
Process of loaning
The process of crypto loans has been made simpler by companies that buy and sell cryptocurrency. Bitcoin Dealer is an Australian company that buys and sells all major cryptocurrencies such as bitcoin. They have locations in the three major cities of Australia- Sydney, Melbourne, and Adelaide. They provide loans to anyone with cryptocurrency assets.
The loan providers work like a normal bank and remit funds to borrowers after agreeing to their terms and conditions. The borrowers pay regular interest payments to the lenders. The interest payments can be fixed or floating according to each loan’s term.
Cryptocurrency loans can be a saving grace in countries that have hyper-inflationary environments where interests for traditional loans rise rapidly. Thus, cryptocurrency loans are more advanced and upgraded type loans. After the end of the tenure of the loan, the collateralized cryptocurrency is given back to the borrower.
Reasons to take a crypto-backed loan
- Cryptocurrency is not sold: The cryptocurrency that they have does not have to be held as the longer you hold it, the greater the value. After the end of the loan, the cryptocurrency will be returned.
- The simple process of loaning: These loans can be availed by sitting at home on your computer.
- Instantly issued: There is no need for long documentation, paperwork and other complex processes that take time. The whole process can take approximately 60 minutes.
- Low-interest rates: In comparison to traditional loans, these crypto-backed loans have very low-interest rates.
- No income tax: Since the borrowers are not actually selling the cryptocurrency or earning from it, they do not have to pay income tax. It is just in the holds of someone else for the tenure of the loan.
- Possibility of future profits: The possibility of earning future profits will not decrease. His cryptocurrency assets are not lost by the borrowers, they can reclaim them later.
- No background checks: Unlike traditional banks, the borrowers don’t have to prove their creditworthiness to the sellers. Anybody with cryptocurrency assets can get the loan.
- No lower limit: There is no lower limit for the amount of money that can be borrowed. The amount of money that can be borrowed depends upon the equivalent amount of cryptocurrency to back it.
- Peer-to-peer borrowing and lending: Borrowers can apply for loans from investors with mutually agreed interest rates. There is no need for strict financial institutions such as in traditional loans.
The crypto-backed loans still are at its nurturing stage. However, in the next decade, it will be gaining momentum and become a new way of loaning and investment. If all governments accept cryptocurrencies as fiat money then this system will become popular.