Did you know you can use your crypto assets to secure a loan in the decentralized finance (DeFi) world? If not, this guide is for you. We will take you through the process of securing a crypto loan.
Crypto Loan Defined
Crypto loans are similar to loans obtained from traditional banks. What makes them different is that the borrower must collateralize them with cryptocurrencies rather than physical assets.
Some lenders offer a variety of crypto assets as loans, while others have chosen to stick with two of the most popular digital currencies, Ethereum and Bitcoin.
In terms of loan repayments, you may be required to repay your crypto loans within a few months or years, depending on the lenders’ terms. These loans attract lower interest rates than those charged by banks.
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How Do You Get a Crypto Loan?
There are several crypto lenders in the decentralized finance space. We chose YouHolder for this guide. Before borrowing a loan from any lender, always do your homework.
Here is how you can get a crypto loan from YouHodler:
Register a YouHoldler Account
YouHodler lets users who possess crypto assets borrow funds easily. You can borrow up to 80% of your cryptocurrency’s value, repayable within a year.
Here are some reasons that make YouHodler a recommended crypto lender:
- Accepts more than 30 digital assets as loan collateral.
- Disburses loans in stablecoins and various fiat currencies, including USD, EUR, and Swiss Franc.
- Processes loans instantly.
- Does not conduct credit checks, allowing people with bad credit scores to access loans.
To register with YouHodler, visit app.youhodler.com, then go to the “Sign up” section and follow the instructions. The registration process only takes a few minutes.
Deposit Funds to Your Newly Created Hodler Account
After creating an account, you need to deposit crypto assets that will serve as collateral when borrowing a loan. Depositing is free. Moreover, you can transfer more than 30 cryptocurrencies to your YouHodler account.
Apply for a Loan
You now have your collateral. It is time to submit a crypto loan application. To do this, click “Loans” and then “Create a New Loan” on the homepage. After that, use the YouHolder loan calculator to determine how much you are eligible to borrow based on the deposited collateral.
In our case, you deposited 10,000 GALA tokens as collateral, and the lender allowed us to borrow 225 USDT. In addition, our daily interest rate stood at 0.0276%.
One fantastic feature we found on Youdler is “Take Profit.” With this functionality, you can instruct the crypto lender to sell your collateral when the crypto assets reach a particular price.
Withdraw Your Crypto Loan
Immediately after Youhodler approves your loan, it is sent to your account. From there, you can decide to convert or withdraw it. If you choose the latter, YouHodler will allow you to make external crypto transfers or bank transfers via SWIFT and SEPA.
Start Repaying Your Loan
Loans taken from YouHodler can be repaid using bank wire, AdvCash, and crypto transfers. Once you finish repaying the loan, the crypto lender will give you back your collateral.
Factors to Consider When Taking Crypto Loans
Liquidity of the crypto lender: Look for lenders with enough liquidity to help you obtain your desired loan amount.
Risk of bad actors: It is worth mentioning that since decentralized finance is unregulated, it has attracted bad actors who only aim at robbing innocent investors. Therefore, research before depositing funds on any platform.
Risk of hacks: All online platforms can be attacked by cybercriminals. So, choose a lender that employs proper security measures to reduce the risks of exploits.
Can you Borrow a Crypto Loan Without Providing Collateral?
It is possible to access crypto loans without depositing collateral. Such loans are known as flash loans. Many crypto users borrow these loans to exploit arbitrage opportunities.
Since crypto lenders don’t perform any credit checks, it is easy for anyone to access loans. However, the DeFi industry is still unregulated, making it prone to scams. Therefore, researching before using any platform is advisable.
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