How Crypto-backed Loans Benefit Borrowers and Lenders
August 25, 2019 | Cryptocurrencies, Finance | No Comments
More and more individuals are taking out consumer loans as they could be very helpful and useful, especially now that there are more lending companies and options which are alternatives to traditional loans taken from banks. For example, the American Pride Legal Funding provides automobile accident settlement loans which could be issued quickly after approval. Such loans make it easier for individuals to settle any unforeseen expenditures.
Most consumer loans are secured, which means that a collateral is needed to acquire a loan. Collaterals depend on the type and amount of loan you are getting. With the increase and progress of online lending as well as technology itself, cryptocurrency could now be used as collateral to obtain a loan.
Known as crypto-backed loans, these loans are secured or insured by crypto or digital currency assets, meaning fiat money are lent or loaned in exchange for cryptocurrency such as Bitcoin, Ether, or Litecoin as security or guarantee for payment. Many crypto holders take put crypto-back loans since the loan process is uncomplicated and the fiat money is directly transmitted into the bank account or digital wallets of the borrower.
Crypto holders may find crypto-backed loans to be a very cost-effective means for managing the digital currency as necessitating access to the fiat money (typically US dollars). So how can crypto-backed loans be used? Here are some:
- Compensate for travel expenditures like vacation trips
- Purchasing a home or investing in real estate
- Financing a business startup or business undertakings and operating costs
- Consolidating or settling debts
- For other personal purchases or products and services
How Crypto-backed Loans Benefit Borrowers?
Lenders don’t usually do credit history checks as well ask for evidence of payment capability. This could be regarded as a major likelihood of credit risk.
- Loans could be easily and directly transferred to your bank account or digital wallet and could be withdrawn via any bank card ore bank transfer.
- Lenders of crypto-backed loans could offer a borrower a lending term and condition that is flexible which could be made better for both the borrower and the lender.
- Crypto holders could use various digital currencies, such as Bitcoin and Litecoin, as collateral.
- Crypto assets could be preserved or kept as no requirements are needed to sell them for fiat money.
How Crypto-backed Loans Benefit Lenders?
- There is a minimized risk since the total repayment or settlement of the loan as well as the interest is guaranteed and without deferments.
- The system or method is fundamentally automated; moreover the exchange directly transpires in the bank account thus making it simpler to keep an eye on and track fund usage.
- The range is stretched to audience of borrowers across the globe causing decentralized peer-to-peer crypto lending to be perimeter agnostic, hence loans could be extended in whichever currency that is available.
- Complete legal status is given and the strong setup guarantees security of the funds.
- Barriers are not present with regards to the least possible requirements for a lender. Any legally recognized entity or individual could be a lender.