A crypto backed loan is basically a loan given to a borrower which is collateralized by his or her cryptocurrency assets. This loan is secured by use of a smart contract-based system operating on the blockchain protocol and can be modified according to the borrower’s preferences. Contracts can be created for a duration ranging from just a number of days to months, and even years.
Additionally, in countries owing a hyper-inflationary environments – investors seeking safe havens in cryptocurrency can obtain loans at reasonable rates of interest rather than facing the prospect of borrowing from local banks which is close to unfeasible since one can’t borrow from a bank during times of hyperinflation. Thus, crypto loans work as a more advanced, secure and efficient upgrade to traditional loans.
Reasons to Avail a Crypto-backed Loan
Getting a loan, especially one involving a huge amount, is neither easy not any simple in our post-modern economy.
Banks are very slow in alloting loans to new startups and SMEs. Providing that banks do lend to these enterprises, they offer very expensive loans, keep the profits and pass on the liability to a third party. This results in very less long-term accountability. This is also one of the reason of the economic collapse of 2007-2008.
Luckily, there is a far better solution discussed in this article. Here are a few reasons as to why availing crypto loans is smart, specially for a Hodler.
Holders won’t have to sell their Crypto
Holding in contact with crypto, could turn out to be considerably more profitable in the long run and selling it at the current rate could serve to be an extremely sad decision in hindsight.
When bagging a crypto loan, holders would get the money they need without bothering, as for most of crypto-backed money lending businesses permits you to claim your assets back whenever you needed without facing any penalties about early repayment of the loan.
Surprisingly Simple Process
There are a lot of misunderstood people out there spreading rumors about how getting a crypto loan is just as hard— if not, harder than getting a normal loan but they couldn’t be far from the truth.
People can avail these loans just sitting at home, as compared to traditional loans wherein people have to visit their respective banks and personally meet with a bank employee to request for a loan.
Not like conventional or normal loans that needed a lengthy and complex paperwork and documentation, crypto backed loans get issued about instantly.
Indeed many people get surprised by just how quick the whole process is and how they got the money they need in their accounts in under sixty minutes.
This is definitely fantastic for people who have problems paying high-interest amounts due to the fact that most of the developed world is quite easy with taking on expensive debt. This is due to a lot of people aren’t financially informed, resulting in the prioritizing of short-term loans over long-term loans.
No Income Tax
A major problem that holders face is the payment of an income tax. On taking a crypto-backed loan holders would still be in ownership of their crypto-assets and as they are not selling their cryptocurrencies, they wouldn’t have to pay an income tax.
Possibility of Future Profits
While the holder’s crypto assets would be taken as collateral, as mention previously they would still pertain to the borrower who will not lose out on any potential gain they could earn while a rise in the crypto value of their assets.
This makes taking a crypto backed loan instead of selling cryptocurrency a great win-win situation for the borrower.
All the reasons come together and make for a pretty convincing argument in favor of the decision to take a crypto loan from various Cryptocurrency Exchanges or other sources. Also,the Cryptocurrency Trading Platform provides an interesting service known as “Margin Funding” in which users are able to provide funding in the form of multiple currencies.