Frequently Asked Questions
Browse our most frequently asked questions, and if you can’t find what you’re looking for, please don’t hesitate to get in touch with the BlockLender team.
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- What is crypto lending?
A crypto loan is a type of secured loan in which your digital assets are used as collateral in exchange for liquidity in the form of stablecoins. Crypto lending is the process of depositing cryptocurrency that is lent out to borrowers in return for regular interest payments. A crypto loan lets you borrow whenever you choose, for whatever reason you choose. Similar to other assets, like a stock, house or car, your cryptocurrency can serve as collateral for loans.
- How much can I borrow?
With BlockLender you can borrow up to 50% of the value of the digital assets you pledge as collateral, without having to sell any of it.
- Why should I borrow crypto instead of fiat?
With traditional loans offered by banks and other financial institutions, prospective borrowers must jump through multiple hurdles. First, the lender might reject a borrower’s loan application based on a number of factors which sometimes are not clear or transparent. If borrowers haven’t built up a credit history or their credit score is too low, if their employment history is not long enough or inconsistent, based on their age, income, or other various factors that are not always openly disclosed. Even when lenders approve a loan application, the average approval wait time is months as opposed to days or even minutes with crypto loans.
- What are the benefits of crypto-backed loans?
- Low interest rates: Because they’re secured by an asset, crypto loans charge lower interest rates than many unsecured personal loans and credit cards.
- Ownership: If you need cash, a crypto loan allows you to get the money you need without forcing you to sell your digital asset holdings.
- Quick funding: Once you’re approved, you may be able to get your loan funds within hours.
- No credit check: In many cases, the crypto lending platforms won’t run a credit check when you apply. If your credit history is less than stellar, this could be an incredibly attractive alternative.
- Why BlockLender?
- No need to incur exchange fees for conversion to fiat.
- No need to trigger a tax liability by realizing investment gains from the sale of digital assets.
- Your crypto stays as crypto and you continue to benefit from any increase in its value.
- Because of the way we fund our loans, your crypto never leaves our custody.
- How does it work?
The crypto lending process happens in a few steps:
- Open blocklender.io and click on Sign Up.
- Complete your verification by telling us a bit more about who you are and what you do.
- Deposit your crypto collateral in BTC or ETH. Don’t worry, with our partners, your crypto is covered by bank-level security.
- Request your loan and withdraw it in either USDC, or GBP or EUR.
- Use it for the purposes you need – new car, new home, new assets – your crypto, your choice!
- Start paying back at your convenience. Interest is added to the loan amount, so there’s no monthly payments to make.
- When you manage to pay off the whole loan, you will get back your crypto collateral less the interest incurred.
- What is APR and how do you determine it?
The Annual Percentage Rate (APR) represents the price you pay to borrow money. If you’ve ever applied for a car loan, a mortgage or a credit card, you’ve probably seen the term before. While traditional financial institutions use this term for various purposes such as credit card APR, mortgage APR, etc., we will focus on a specific type of APR for crypto and consider it as a fixed APR.
Depending on the or crypto coins, APR may vary from 4% to 18% (as of October 2022). It depends on the fact if you are using stable or standard coins as collateral and the risks associated with them, as well as the types of loans – collateralized, non-collateralized, line of credit, flash loans, etc.
BlockLender is offering collateralised loans with a fixed APR of 4.5%, one of the lowest in the market. The way we achieve this? We partner with the best in the industry to deliver what you need, as you need it, at a reasonable price and without taking unnecessary risks with your crypto.
- Why do crypto loans require over collateralization?
With BlockLender, borrowers use cryptocurrencies such as Bitcoin and Ethereum as collateral for their loan.
Borrowers can then freely use the loan capital to purchase a home with crypto, buy a car, and more. Crypto loans help to automate the entire loan process, including loan origination and repayment.
An over-collateralised loan is one in which the borrower is required to supply crypto collateral up front that has a value greater than the initial value of the loan they receive.
This rate, known as loan-to-value (LTV), is set to 50% for BlockLender. This allows us to offer you one of the lowest interest rates in the market.
- Are there any risks involved with lending crypto?
Cryptocurrency lending is inherently risky for both borrowers and lenders because the loans and deposited funds are beholden to the relatively volatile crypto market. However, taking out a crypto loan is very quick and easy compared to traditional loans. You will get a loan amount depending on how much collateral you can use – up to 50%, as much as you need for as long as you need it.
- What can a crypto loan be used for?
A crypto loan can be used at your discretion, often without any restrictions from the lender, similar to a personal loan. The cash from the loan can be used for large payments like a down payment for a house, buying a car, tuition, refinancing debt or starting your own business.
- What is Loan-to-Value (LTV) Ratio?
A Loan-to-Value (LTV) ratio is an indicator representing the size of a loan compared to the value of the assets securing the loan. Example: if your loan’s outstanding balance is $50,000 and the value of your BTC collateral securing the loan is $100,000, the LTV ratio is 50,000 ÷ 100,000 = 50%.
- How is the LTV ratio calculated after the loan has been granted?
We calculate the loan to value ratio using the following formula: (Total unpaid value of principal + Total unpaid interest) / Collateral Market Value