Get access to capital not only through an unsecured business loan but by using your cryptocurrency as collateral to gain access to loans. This is called Crypto Loans.
Get a Loan Using Cryptocurrency
What is Crypto Loans?
Crypto loan is a platform that allows you to use your cryptocurrency as collateral in order to take a loan out with low-interest rates. If you have ever taken a loan out in the past, you will notice that many of these companies will actually check your credit score but not all of us have credit scores so it is very hard for us to get a loan. Even if our credit score is good, sometimes simply reject us because they don’t feel confident that we’ll be able to repay them back in the long term.
This kind of service is offered by various lending services like Salt lending. They offer a very unique service whereby instead of using your credit score, all you need is to have some Bitcoin, Etherium, or any other cryptocurrency that you can use as collateral that the lender feels comfortable with.
How does it work?
How it works is very simple. Once you are ready to take out a loan and you agree to the terms, you actually take your cryptocurrency that they accept and you are going to send it to the salt lending wallet. Once it’s in the salt lending wallet, they’re actually going to send you US dollars to your bank account. Just like most loans, you will have to pay on a monthly basis.
Important note: It’s important to know that when you send your cryptocurrency, you still own that cryptocurrency. They are just holding it as collateral in case you can’t repay. For instance, let’s just say that you can’t repay your loan, when your monthly payment comes up, they’re going to sell some of your cryptocurrency in order to offset what you owe them in line. So they are simply holding this cryptocurrency in case you can’t repay but at the end of the day, it’s still yours.
What is loan-to-value?
This means that if your cryptocurrency drops in value while your loan is out, there’s a chance that you are going to ask you to deposit more of that cryptocurrency. They want to make sure that the cryptocurrency that is stored with them is enough to pay off the loan that you owe them. It’s a way for them to reduce their risk so they’re trying to keep the loan-to-value in balance.
Conversely, if bitcoin goes up in value, that means that there’s a chance that you can actually take out a bigger loan as it goes up and down in value because once again this cryptocurrency that they’re holding is still yours. So if Bitcoin appreciates, you can still use and leverage that to take out more loans. So bottom line, it all depends on what that loan-to-value ratio is.
When you actually pay back the loan in full, they are going to release the collateral or cryptocurrency back to your wallet and back into your possession.
Why is this service (gaining loans by using cryptocurrency as collateral)?
There are two reasons why this service is great. First, it frees up capital. That means that when you make an investment, that capital that you invested is tied up. But it would be so nice to be able to take that capital that’s invested and ultimately be able to invest it elsewhere. This is possible through salt lending. The second reason is that it allows us to take a realized game but not have to pay taxes because you are not really taking it out as a realized game but you are actually taking it out as debt.