When you make an application for a loan in a bank, the assessment is very rigorous. At times, the lender digs back trying to understand personal spending habits before approving or declining loans. It is time to say goodbye to this invasive process by considering crypto Loans. This post goes deeper into crypto lending to demonstrate why you should not be left behind.
What is Crypto Lending?
This is a type of service offered by decentralized finance platforms, allowing people to borrow money against their cryptos. So, you get the money you want to fund a specific activity or buy an asset without going through unnecessary credit checks. Ultimately, you receive back the coins after repaying the loan.
The good thing about crypto lending is that you are not selling your crypto coins. If the price of the coin goes up, it means that you also enjoy growth in value. To get your coins earlier than agreed, perhaps to take advantage of a price surge, simply pay the loan. Then, they will be credited to your crypto wallet immediately.
The Crypto Lending Process
Crypto lending starts when a borrower visits a decentralized finance (DeFi) platform and makes a request for a loan. The only thing that is required is for you to have the coins to commit as collateral. If the loan application is approved, the borrower is required to put forward the crypto collateral, which will be returned when the loan is repaid.
Once the lender puts forward the collateral and agrees to the terms and conditions, which list the repayment dates and interest, the loan is credited to his account. The process utilizes smart contracts, which are self-executing to ensure that all the conditions are adhered to. So, your coins will be automatically credited to your account after repaying the loan. If you fail to live to the agreement, the smart contract will execute and you will lose the collateral coins.
Special Benefits of Using Crypto Loans
As we highlighted earlier, crypto lending is an emerging trend, but it is growing rapidly. During the COVID-19 pandemic, it became clear that your traditional financial organization can fail you when you need it most. So, it will be a good idea to have an alternative, such as crypto lending through decentralized finance platforms. Here are some of the main benefits associated with crypto lending:
- The loan is approved fast: As long as you have crypto coins to put forward as collateral, it will take a very short time to get the cash in your account. This might be all that you need to address an emergency or buy that car.
- You do not have to use a house or car as collateral: Most banks will only accept collateral in the form of easy-to-sell assets, such as cars and properties. However, this could put the assets at serious risk. But giving some of your coins as collateral does not put the house at risk of getting auctioned. If something happens and you cannot repay the loan, the only thing you lose is the crypto coins.
- Failure to repay does not impact your credit score: If you put forward a car as collateral for a loan and you are unable to repay, the vehicle will be auctioned to recover the money. In addition, your score will be impacted negatively. However, this does not happen when taking crypto loans. The only thing that you can lose is the crypto coins.
Crypto lending is an excellent alternative to bank loans. It is processed fast, comes with low-interest rates, and there are no background checks. Remember that you also need a good DeFi platform that offers crypto lending. One of the best examples is Mantra Dao, and you can count on them for the best results.
About the Author:
Mashum Mollah is a Fintech entrepreneur and a passionate blogger. He is on a mission to help small businesses grow online. He shares his journey, insights and experiences at Finance Team. If you are an entrepreneur, marketing professional, or simply an info-holic, then this blog is for you.