An Insight on Cryptocurrency Backed Loans: Why Do You Need Them?

March 04, 2019 Quick read

Since cryptocurrencies "Big Bang", Cryptocurrency Trading Platforms have smartly been adopted into a mammoth full-fledged banking service and businesses all around the world are welcoming this change with open arms. Crypto banking has become a big thing in the online world and now it's time to understand what new possibilities await the crypto world.


Unlike traditional banking loans, crypto loans were innovated to devise a decentralized payment scheme that worked on the principle of peer-to-peer network sharing protocol. The main objective of a crypto loan was to establish a sense of trust without any interruption of unnecessary third party regulators or central authorities.

Also crypto loans act like a direct link of communication between the lender and the borrower with a mutual understanding of shared benefits.

·       Crypto-Backed Loans

A great arsenal for Fintech, crypto-backed loans are posing huge threats to traditional banking systems that is often called out by money lending enthusiasts for its ignorance of cash transparency and deceitful schemes.

Traditional loans call for a lot of registration and documentation hassles, the borrower has to undergo hours of crucial authentication compliances. On top of that, traditional bucks charge an unbelievable high sum of money with crazy interest rates and extra underlying fees which can take a toll on the overall morale of the interested borrower.

As for deeply invested crypto buffoons, the only trouble that seeks their attention is the fact that they cannot easily acquire loans without insanely high interest rates. This is where crypto-backed loans come into the picture. A crypto-backed loan is in simple terms, a loan that is provided to an eager borrower that is collateralized on the quant of their cryptocurrency assets. Furthermore, this loan is secured using a smart contract-based system that freely rules the Blockchain protocol and can be changed according to the borrower's needs.

Post this, after the entire settlement is done, the documentation is sanctioned on the Blockchain and the loan is approved. And the best part? No paperwork is involved. Even highly volatile countries provide investors with the benefit that they can get loans at a lesser rate of interest which cannot be done with traditional banks in times of hyperinflation.

·       The Process That Goes Down in a Crypto-Backed Loan

Crypto-backed loans work similarly as traditional loans; the borrowing party receives funding from the registered platform after ticking off yes on the entire terms and conditions list. After that, the borrower is supposed to regularly make the necessary interest payments to all the lenders.

And once all the necessary payments are done, the collateralized cryptocurrency finds its way back to the borrower and the contract is deemed as completed where the entire loan procedure is undertaken by the Blockchain. The collateralized assets can be extremely volatile and are exposed to margin calls. In case the collateral value is compromised then the borrower has to get collateral in order to secure the loan once again.

·       Crypto-Backed Loans: Hit or Miss?

We can all agree on this, availing a loan is not for the weak hearted especially when large amounts are involved.

Traditional banks take a lot of time in issuing loans and then actually approving them, the baggage that comes along with requesting a loan is burdensome and for most people accounts for low profitability; that is exactly why a crypto-backed loan could be great for masses.

Now that Cryptocurrency Exchanges are on the rise, it's time to give a chance to crypto-backed loans as well. There are multiple reasons for that.

·      The interest rate is low.

·       No income tax woes.

·       Crypto will stay secure.

·       Instant loan approval.

·       More profit pathways.

Explore your gateways because when it comes to crypto, it's now or never.