According to some statistics, around 20 million US citizens have an outstanding personal loan. The lending market is constantly growing because people always need money for real estate purchases, consolidating debt, handling medical expenses, etc.

Thanks to cryptocurrencies, there is now finally an alternative to traditional bank loans. New lending systems have been developed, which allow users to borrow money by using digital coins as collateral. What this means for you is easier access to funds and liquidity.


    The Main Features of Crypto Lending

Just like in traditional lending markets, crypto loans are a vast ocean of possibilities, and you need to learn how to navigate them properly. Detailed analysis, comparisons, and considerations are required to find what is best for you. I had to do this research myself because not that long ago, I needed a loan myself, and I now feel confident sharing what I discovered with my readers.

For example, if you want to borrow money, you could provide cryptocurrency as collateral for your loan. That’s what crypto lending is. It's not uncommon for people to take out a loan in stablecoins or another kind of digital currency instead of in real cash and fiat money.

There are a few main aspects of crypto loans worth considering: How high is the APR and LTV, and how much money can I borrow?

APR is the Annual Percentage Rate. It’s the interest and profit a service provider generates to lend out its money. As a borrower, you will, of course, be interested in platforms charging low APRs. Luckily for you, a lot of the service providers in the crypto space do just that. In addition, cryptocurrency loans come with much lower interest rates than what you would get from your local bank. So instead of paying an APR of 20%, you can halve these costs, although they can be as low as a few percent in rare circumstances.

Next up is the Loan-To-Value or LTV ratio. You see, your collateral’s value determines how much you can borrow. For example, you can’t expect to receive $1.000 worth of USDT for $1.000 of Bitcoin. Many borrowers could decide to default on their loans, and that way, the lending platforms aren’t making any money. To protect their business, the collateral needs to be more valuable than the borrowed asset. Going for a crypto loan with a high LTV rate is in your best interest because you are getting more value for your collateral that way. You should be aiming for an LTV of 50% or more. That would mean that for $1.000 worth of BTC collateral, for example, the lender would give you $500 of alternative coins.

Some crypto lending and borrowing platforms have minimum and maximum sums that can be loaned out. There are no firm rules, and each service provider decides for themselves. If you need a small crypto loan, you should know that certain lenders require their clients to borrow at least $10.000. But luckily, some have no minimum or maximum amounts. Always try to pick services that aren’t forcing you to go above your own limits.

LTV and APR rates can be fixed at a certain percentage or dynamic and changeable according to the type of asset or market conditions. Fluctuating rates provide more opportunities but greater uncertainty. Fixed rates are more reliable and less risky. They are better suited for people who prefer no surprises.

Crypto lending has several other features that make it attractive:

* There is a variety of digital coins to select between depending on your demands.
* A quick onboarding process for clients. Your loan takes less than an hour or a few blockchain confirmations to be approved.
* Anyone with adequate collateral may get a loan without running through credit and security checks.

An Overview of Crypto Loans Services

Let’s now take a look at some familiar names in the crypto lending space: Aave, BlockFi, Celsius, ChangeNOW, CoinLoan, Crypto.com, Nexo, YouHodler and Unchained Capital.