Loans are very beneficial and powerful especially if you are a responsible buyer and consumer. The usual loans we know is the personal loan where we will apply at the bank or any companies that offer personal loans. In http://forbrukslån.com/, for example, not only they grant loan to one item only such as house or car, but they give their clients the opportunity to diversify the money in to different items. This will lessen the interest per item. The cryptocurrency or Bitcoin loans do not work like the regular loans. They are different and come with multiple different challenges. Bitcoin loans is ripe with growth and possibilities.
Why is Bitcoin Different?
Currently, Bitcoin is probably the best money the world has ever seen. However, it is not as good at being fiat money. Fiat money, due to its nature of being created from debt is really good at being used for debt. On the other hand, bitcoin, as a sound finite money just like physical gold cannot easily be created out of thin air. This is what makes bitcoin economically better money. However, it also means to the banks that they cannot print more bitcoin to fund your loan.
Also, Bitcoin is mined in an electronic process which can be compared to physical gold mining. Like physical gold, you cannot just create bitcoin. It takes a lot of resources to mint new Bitcoin. Bitcoin also has a limited supply of 21 Million. So unlike fiat money which literally has no supply limit, Bitcoin has a limit. It only means that when you borrow bitcoin, you are borrowing directly from the bitcoin owner. This means that all Bitcoin loans effectively become peer to peer. Which is why it makes sense that the only Bitcoin financial platforms are in fact P2P.
How Does P2P Work
If you are quite intimidated of bitcoin and the p2p process, then you should not because it is actually simple. For example, you want to take out a 1 Bitcoin loan at one of the 2 main P2P Bitcoin lending platforms. The premise is that you create a listing just like a loan contract at a bank. The contract spells out the principle, when payments are due, and the interest amount for the loan. Up to this point it was pretty similar to bank loans.
At this point with a bank loan the banker would have to either personally underwrite (take on the risk of default) the loan themselves or sell that debt contract to another banker.