Crypto Loans

With Defi banking removing barriers between investors and their money, crypto users can now expand their portfolios using collateralized loans. Instead of monthly timescales waiting to finance big-ticket purchases, transactions can be placed and completed in the same business day in under an hour. Utilizing assets in personal crypto wallets, an investor can reach their financial goals or secure investments previously limited by their spending capacity with the potential to earn interest on their borrowed coins once paid off.

Making Crypto Work For you

The initial strategy of profiting from cryptocurrency saw holders sit on their earnings and monitor prices to sell for profit gain. Very few make high-yield payouts. More often end up with little profit margin. Instead of playing the odds, blockchain lending allows immediate monetization of your crypto by borrowing up to 50 percent value and being given stable coin worth current USD value.

Many people who’ve invested in digital currency have faced challenges making big-ticket purchases or using their available assets for capital needs. Real estate lenders don’t accept crypto as a down payment for a home or renovations, nor do auto dealers. For small business owners who need to make payroll or meet expenses, a quick crypto-backed loan can enable financing for an individual with few alternative options.

For people already signed on to a high-interest loan, crypto offers better choices. They can look at funding through a crypto-backed collateralized loan to pay off the high interest while transferring to a contract with fewer fees and penalties. With high-value assets like Bitcoin or Litecoin, the interest remains relatively low while the pay scale is the same as with a regular money loan.

How Do Crypto-Backed Loans Work

In exchange for your crypto assets, specifically Bitcoin, Ethereum, or Litecoin, Blockfi will hold the assets and give the valued amount of USD stable coin in exchange. This stable coin is of such low volatility it will always keep a 1:1 dollar ratio. Often these coins are backed by established banks and trusts to provide a reliable payout. USD, GUSD, and USDC are stable coins pegged to the US dollar amount and accepted for large-scale transactions. It could be real estate, a car loan, or a down payment on a vacation. The loan allows immediate use of decentralized financial assets in previously excluded markets.There’s more to it than just the money made immediately.

A loan backed by a fluctuating value asset like bitcoin cannot be actively taxed as income until exchanged for dollar value. While in holding, the loan may be paid off in scheduled payments or as a lump sum, with the accruing interest viable as a deduction come tax season. Talk with your tax advisor and check the market value of your assets to be sure your tax filings or correct before taking out a loan.

Making Major Purchases

What makes cryptocurrency difficult in the market is its inability to make large-scale purchases like buying real estate or paying living expenses. With the backed loan process, users can transform their digital currency into liquid cash or credit accepted by brokers and retailers. This feature allows for large-scale purchasing using crypto assets, increasing the potential of running business transactions through the digital currency market. As more outlets open to using cryptocurrency in domestic markets, the ability to convert between currency forms will be a high priority for business owners and investors looking to maximize their earnings.

Margin Call and Loan-to-Value

When a highly volatile crypto asset lowers in value to the point its 70% is previous value, there will come warning in the form of a margin call where more collateral is needed to match the value of the exchanged USD. The margin is based on the Loan-to-Value ratio, calculated by the amount of the loan differentiated by the current value of the assets. For collateralized loans, this ratio benefits both lender and borrower as at the end of payment the assets are returned to the borrower along with any accrued interest. Crypto assets are one of the few loaned assets that have the potential to increase substantially in worth over time, making a loan less of debt and more of future investment. Keeping up to date on valuation and payments can guarantee a fair payout when completed.