When you are a registered user on Binance, you are able to borrow cryptocurrencies on Binance Loans. Binance supports a wide range of borrowable crypto assets and collateral assets including internal risk management.
Let me explain in what case it makes sense to borrow crypto and how exactly it works with Binance Loans.
Why Using Crypto Loans
Imagine you have an unexpected bill to pay and all you have is some crypto that you can liquidate to pay the bill. In the best case, you are in the middle of a bull market and you can sell some of your cryptos at a good price to be able to pay the bill.
In the worst case, you are in the middle of a bear market which is no good timing to sell your crypto just to pay an urgent bill. This is where crypto loans are coming into play. You can use your crypto as collateral and borrow stablecoins that you can use to pay the bill. You can keep your precious cryptos without the need to sell them at bad prices while you are in the middle of a bear market. This is a situation where borrowing instead of selling really makes sense.
If you are brave you can also borrow crypto to use it for staking to earn high APY.
Binance Loans support the borrowing of several different cryptos, including BTC, ETH, BNB, BUSD, and USDT. If I need the loan to pay a bill in the middle of a bear market, I prefer borrowing a stable coin like BUSD or USDT.
You can borrow crypto for a timeframe of 7, 14, 30, 90, or 180 days while you can always repay your loan in advance. The interest rate is comparable with disposition credit on your bank account and it is calculated based on the hours borrowed.
How To Use Binance Crypto Loans
Of course, if you want to use Binance Loans you need to be a registered user on Binance. Head over to Crypto Loans under the Finance tab.
Enter the amount you want to borrow and choose the crypto that you want to use as collateral as well as the loan term. The collateral amount will show up automatically.
Some cryptos that you can use as collateral like CAKE are even stakable during the loan term. The staking rewards you receive during this time can even reduce the interest to zero.
Here is another example: You want to borrow $100 in BUSD for 180 days and use Bitcoin as collateral. The exact Collateral amount will show up automatically. In the right box, you will see more details like the initial Loan-to-value-ratio. the liquidation price and the interest rate.
When you have to pay a total interest amount of $7.20 for 180 days then the annual interest rate is around 14.4%.
If the value of your collateral made a 2x during that time, then you made indeed a good deal.
If everything is set, click on the yellow Start Borrowing Now button.
A confirmation pop-up will appear. Confirm all the information on the Order and agree to the Binance Loans Service Agreement.
Now, you got the borrowed amount in your spot wallet and you can use it to pay your urgent bills during the bear market.
You will be able to monitor your ongoing order on the Binance Loans page. Here you can adjust the loan-to-value ratio as well as repay and renew the borrowed amount. In case of liquidation, you will be charged a 2% liquidation fee from the total amount borrowed.
For more detailed information also check out the FAQ section of Binance Loans.
My Final Thoughts
The next time you have to pay an urgent bill during the bear market keep in mind that you don't have to sell your crypto right away. Instead, you can keep it, borrow some and wait for the next bull market.
I hope I could provide you with some useful information about Binance Loans, when it makes sense, and how it works.
Finally, I also like to remind you that my intention in this post is to raise your awareness of Binance Loans and my intention is not to replace your own research.
If you are not registered on Binance yet, you can use my referral link with the invitation code E3PGAJCE for signing up. When you use it, it will save you some trading fees each time you perform a trade on Binance. Don't forget about this possibility when you introduce your friends and family to cryptocurrency yourself as it will save both of you some money.
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