Cryptocurrency has gained rising popularity, and many people are adopting the use of digital currencies for transactions. The word "Cryptocurrency" has become very popular in Europe, the US, and the rest of the world. However, some Cryptocurrencies are highly volatile in the short term, and we can see how Bitcoin has Doubled in value from December 2020 to April 2021. By mid-July 2021, Bitcoin had nearly lost all of its value.
There are a lot of cryptocurrency owners who are not buying Digital Currencies for short-term gains; they are in it for the long haul. They are mostly called "Hoarders" in the crypto community, or you might have heard "HODL" somewhere, a term primarily associated with people who hold on to their crypto for years.
Users like that are now open to using their digital assets as collateral for loans. Today, we will talk about crypto lending and list some top crypto lending platforms. We will also share with you whether crypto lending is safe and the risks involved.
What is Crypto Lending
A cryptocurrency-backed loan is a collateralized loan that you can get from a crypto lending platform or crypto exchange. The loans work in the same way a mortgage or a car loan works because you are using an asset. In this aspect, you will be using your Cryptocurrency as collateral to secure the loan.
You can also decide to borrow your Cryptocurrency from a crypto platform. You will be able to earn interest on your digital assets when you lend them to institutional borrowers. For example, let's say you have a lot of cash stashed in your savings account, and your bank pays you interest in exchange for using it to issue loans to other customers. Let's move ahead and present you with a list of the best platforms that can be used to get crypto loans.
Best Crypto Lending Platforms
NEXO
Nexo was launched in 2017, and the platform has processed over 1.5 billion dollars from over 1 million users in different countries. The platform also accepts payment in more than forty fiat currencies. In addition, Nexo is an online crypto lending platform that offers financial benefits for storing crypto assets on platforms like Bitcoin and Ethereum within a Nexo secure wallet.
The platform is top-rated among enthusiasts as an alternative method and storage option for investors and companies looking to leverage additional financial benefits for borrowers and lenders. Nexo is led by Action Trenchev, the Co-Founder and Managing Partner; it is also backed by Michael Arrington, a well-known investor and founder of TechCrunch. The platform is reputable and legitimate, and it is trustworthy with a license to operate in more than 200 countries. In addition, they have insured more than $100 million against theft, and it is provided against a qualified custodian BitGo.
Pros
- High-interest rates that are unmatched compared to the traditional banking sector
- Interest is paid daily; this allows crypto profits to stack up over time
- Have access to cash without selling your digital assets
Cons
- Limited amount of cryptocurrencies
YouHodler
This platform is a cryptocurrency exchange and lender that pays great interest on crypto deposits. One of my major problems with the platform is that it is unavailable in the United States. Not to worry, many other media on this list are available in the United States. In addition, customers on YouHodler can use their crypto as collateral on short-term loans.
You can even use the funds borrowed to carry out more trading on the platform. There are some advanced trading tools on the platform, and it also has a strict anti-money laundering process. The interest rate here is decent; you get 5% interest on altcoins and 12% on stablecoins, depending on the currency. Interest is paid weekly on the platform and settled in the same coin. You can decide to withdraw your funds at any time.
Pros
- Borrow with crypto as collateral
- Advanced trading tools
- Earn interest with your crypto
Cons
- Not available in the US
- Not Transparent
- Minimum Investment requirement
BlockFi
BlockFi is available globally, and they offer low-interest rate loans. The platform also provides interest-bearing accounts as well as a cryptocurrency exchange. There are no hidden charges or minimum balances. The platform is perfect for beginners and intermediate crypto investors who want to bridge the gap between traditional finance and crypto.
I have personally recommended some first-time users to BlokFi because it is easy to understand. You can earn an interest of between 3% to 9% on your crypto holdings on BlockFi if you have an interest base account. BlockFi also lets you borrow US dollars with your crypto as collateral, and the interest rate is as low as 4.5%. They also have a credit card in partnership with VISA to earn you 1.5% back in Bitcoin on every purchase. It will be available in the spring of 2021; you can be on the waitlist if you are interested.
Pros
- No commission fees
- Available Worldwide, Except Sanctioned or Watch-listed Countries
- Instant Trading
Cons
- Loan rate volatility
- Limited free withdrawals from interest account
- Savings are not protected against bank failure
Celcius Network
This is another excellent platform for lending crypto; you can also buy and pay in more than thirty currencies. The platform is ideal for beginners because it has an excellent interface that is easy to digest. In addition, you can receive an undercollateralized loan on your crypto asset due to the level of centralization on the platform. Up to 100 million dollars was used to insure all deposits on the platform.
The risk that comes with crypto trading is low on the platform. There are no limitations for withdrawals on the platform, and you can cash out anytime you want to. It can be passive income for crypto HODLers, and you will gain steady returns. There are no account minimum or hidden fees when using Celcius Network.
Pros
- Easy to use
- Available in over 100 countries
- Instant payment without hidden charges
Cons
- Limited cryptocurrencies
- Centralized
CoinLoan
CoinLoan is a European P2P crypto lending platform that offers instant loans with up to 12.3% interest on cryptocurrencies, stable coins, and Fiat currency. They support up to 18 cryptocurrencies, stable coins, and fiat money. You can also earn daily interest on the platform, and it is entirely secure. On the platform, you can get crypto to fiat loans, crypto to crypto loans with some unique features like lockins, and a flexible payment method. There won't be any credit history check on your profile too.
The platform has its token CLT, and they have an excellent user interface on IOS and android. It is not beginner-friendly like other platforms listed above. They are transparent about their security practices while using various methods to secure their platform.
Pros
- High-interest rates
- Available worldwide
- Flexible repayment options
Cons
- It's a new platform
- Might subject to cash drag
Hodlnaut
Hodlnaut was founded in 2019, and it has quickly grown into one of the leading crypto platforms in Asia. The platform offer interest on crypto deposits. Your deposits are loaned out to trusted institutions. They also lend to decentralized protocols and allow their customers to earn interest from their assets. The platform has about six cryptocurrencies, and you can get at least 7.5% APY on some of their cryptocurrencies and as high as 12.7 % APY on Tether (USDT) and USD Coin (USDC).
There is no minimum deposit on the platform, and you can withdraw funds without any restrictions. Interests get credited to Hodlers account on Mondays, and they are calculated in terms of profit over the last days before Monday.
Pros
- The high-interest rate for Bitcoin
- Access to withdraw funds at anytime
- Weekly Payout on Mondays
Cons
- No mobile applications yet
- Limited products
- Only six cryptocurrencies
Ledn.io
This is a platform that exists so investors can earn interest from their digital assets. You can receive interest from your bitcoin or get loans to buy more bitcoin. The headquarters of the ledn is in Canada, but they are available globally. You can have access to loans with your Bitcoin from ledn.io. one of my problems with the platform is the lack of other cryptocurrencies.
Users can earn as high as 12.25% APY when they save their idle digital assets on the platform. You can also collect bitcoin-backed loans as well as B2X loans. The platform is transparent in its dealings and efficient and accountable. They have a mobile app released in January 2021, but it's not as easy to use. The company needs to work on the app to make the user experience better.
Pros
- No Utility tokens
- Cold storage service for Bitcoin
Cons
- Lack of Long-term credibility
- Only Bitcoin and USDC are available
Vauld.com
Vauld is another platform that lets you earn interest on your Bitcoin and other digital currencies as soon as you deposit your funds on their platform. The interests are calculated daily, and you are paid the interest every week. There are no specific times for withdrawals; you can withdraw anytime you want.
They help you manage your cryptocurrencies and allow you to lend, borrow and trade your crypto assets.
It is one of the best crypto lending platforms available, and its headquarters is situated in Singapore. Founded in 2018, they were known as the Bank of Hodlers before switching to Vauld. You can swap between Cryptocurrency and Fiat cash on the platform quickly. They also help you grow more capital by earning interest. The brand has backing from some of the biggest names in the crypto industry, including Coinbase Ventures, BitGo, and Lunex.
Pros
- Beginner-friendly interface
- Backed by big names in the crypto space
- Quickly swap between Cryptocurrency and Fiat cash
Cons
- It's a new platform
Salt Lending
This company was created in 2016, and it is one of the first crypto lending companies ever made. It provides loans in US dollars for holders of Cryptocurrency. This is a typical example of an instance where HODLers can borrow money using their Cryptocurrency as collateral. They have their SALT token, and members can use them to pay for memberships and other perks on the SALT platform.
Interest rates for crypto-backed loans on SALT start from 5.95% interest, but there is no pre-determined set rate for loans on the platform. They accept several Stable coins and altcoins like Doge, BTC, Ether, Litecoin, and Ripple.
Pros
- Comprehensive insurance cover users
- Cold storage security and multi-signature
Cons
- No interest Accounts Available
- Minimum loan amount of 5000 USD
Smart Credit
The company was founded in 2019, and it offers a different service compared to all the platforms on this list. It is a peer-to-peer lending platform that allows direct interactions between P2P customers. There are no charges or intermediaries, unlike with other conventional crypto borrowing platforms.
Borrowers typically submit their loan requests on the platform, and lenders place their loan offers; the matching algorithm will then match loan supply with loan demand. Once a match is identified, the lender can supply ETH, and the borrower can borrow ETH. All loans on the platform are insured for face value. The platform's main aim is to provide the critical components of the alternate blockchain-based financial system: crypto lending/borrowing, fixed-income funds, and integrations.
Pros
- No hidden charges
- You know who is borrowing your digital assets.
Cons
- You can get scammed
Is Crypto Lending Safe?
There is no business without risk, and crypto lending has its fair share of risks. If you want to profit from your capital, you always have to accept the risk that comes with it. The higher your potential profit, the higher the risk involved. Cryptocurrency is an excellent example of this business mechanism. You can amass excessive profits, but you still need to live with the high volatility as a crypto investor.
Crypto lending is not risk-free, and in the usual sense, it shouldn't be. You want to make profits from your crypto savings, and there should be some risk involved certainly. However, before deciding to be a crypto lender or borrower, you need to understand the risks you are about to take and the expected returns justify your risk. You can minimize the risk by making sure you invest with a renowned crypto lending service provider. It is also good to consider investing only in stable coins and also receive interest in regular currencies.
It is actually up to you to adopt whatever strategy you want to use, but if you're going to get higher profits, you have to take additional risks. It is always wise to use stable coins for crypto lending because we all know that volatility is prevalent in the crypto world.
Risk of Crypto Lending
Deposits in Interest accounts are not insured – this is one of the most significant risks in crypto lending. The assets in your crypto interest account are not guaranteed like money in a traditional bank account. So if the exchange fails or has any technical problem, you can lose everything.
Counterparty risk – this is another severe issue when it comes to crypto lending. Crypto lending platforms receive crypto from savers and borrowers. The service providers normally regulate what they can do with the crypto they receive. In the clause, you will agree that they might lend, sell, pledge, hypothecate, assign, invest, use, blend or even dispose of an asset and eligible digital assets to the counterparty. Whether you are a saver or borrower, the platforms will use your crypto assets and make money from them. They lend them to crypto exchanges, hedge funds, and other institutional investors. The risk here is that it creates a counterparty risk because if the counterparty to these trades fails to return the cryptocurrencies, your lending platform provider may become insolvent.
Repayment terms are different – depending on the crypto lending platform, you might have less than a year to repay what you borrowed. Therefore, it is essential to know the repayment length even before you collect the loan. You can create your repayment schedule in some cases, but it is usually a short-term repayment plan. Unlike traditional money institutions, each crypto lender has its terms and conditions, where everything is almost similar.
No access to your digital assets – as long as you have an outstanding balance on your loan, you can't have access to your holdings to transact or trade. It can be an issue if there is volatility and the crypto price drops or appreciates, or you may need cash in a hurry.
The Platforms listed below are centralized platforms let me know if you are interested in using Decentralized exchanges to lend out your crypto. I will provide a list of the best platforms just like this.
