cryptocurrency loan platforms

Best Cryptocurrency Loan Platforms in 2021

The on-going cryptocurrency hype has made crypto loan platforms popular in the last few months. Crypto lending platforms continue attracting HODLers interested in earning money from their crypto assets. You can invest in crypto-backed loans and earn interest from crypto lending platforms.

If you are looking for ways to hedge your positions and reap benefits from your digital assets without liquidating their portfolios, you came to the right place. In this article, we will make a comprehensive comparison of the best crypto loan platforms and give you our judgment regarding the safety of your investment.

What do Crypto Loan Platforms Do?

Crypto loan platforms are online platforms where you can lend your crypto in exchange for interest. These platforms attract both borrowers and lenders:

  • The lender, also known as an investor, has some idle cryptocurrencies, and they use them to generate some passive income.
  • The borrower needs fiat currencies such as EUR, USD, etc., and they take loans that they repay with interest. Borrowers deposit the equivalent in crypto as collateral for the amount they need to borrow. The interest lenders earn depends on the particular coin, while the platforms could charge a fee for providing the service.

When you borrow cash or crypto from crypto loan platforms, you remain the owner of your digital assets. Nonetheless, you cannot use the crypto assets you offer as collateral for trading or any other transaction during the loan tenure.

If you are a HODLer (Hold On for Dear Life) with cryptocurrencies you don’t intend to sell off any time soon, you can lend them for a period via crypto-backed loan platforms and generate passive income.

What to Consider When Choosing a Platform

Finding a suitable crypto-backed loans platform isn’t as simple as it sounds. Since different platforms offer different factors, some things to consider before choosing a crypto loans platform include:

Fund security

You can avoid investing in an insecure platform by ensuring a guarantee about your funds’ security. By reading through the website carefully, you know the safeguards the platform has in place and decide whether it fits your needs before depositing your money.

Number of Coins Available

Don’t rush into a platform before researching the cryptocurrencies they offer. Figure out how viable the coins they offer are in the market to decide if the platform is right for you.

Transaction fees

Since most crypto loan platforms make their money by charging fees for the service offered, find out what type of fees a platform charges before using it. Compare different platforms to avoid spending all your profits on fees.

Complexity of Trading

Go for a crypto loan platform that isn’t too complicated, especially when you’re a beginner, to avoid making costly mistakes.

Custodial vs. non-custodial

Centralized crypto loan platforms, also known as custodial platforms, have individuals or companies handling the processes. They have a custodial system where they keep their customers’ cryptocurrency and fiat assets.

The decentralized crypto platforms, also called decentralized finance (DeFi) systems operate non-custodial automated systems based on smart contracts that distribute loans and interest payments. The non-custodial platforms are more transparent and secure, making them more attractive than their custodial counterparts.

DeFi Loans – Non-Custodial Platforms

Non-custodial crypto loan platforms conduct their borrowing and lending functions via smart contracts. The system escrows the collateral in a smart contract until the loan is repaid, meaning the technical risks are almost non-existent. Since smart contracts retain the custody of the collateral, any counterparty fraud is next to impossible. The most popular DeFi platforms include:

SmartCredit.io

Smartcredit.io is a respected peer-to-peer crypto loan platform that facilitates direct connections between customers. Clients are in charge of their cryptocurrencies via ERC20 Smart Money tokens in their wallets. The platform lets borrowers make requests, and lenders offer loans independently via a loan matching engine that identifies lenders and supplies Ethereum for lending and borrowing. The platform was founded in 2017.

Torque Loans

Torque has been offering users loans with indefinite terms on fixed rates from 2017, when it was founded. Customers can borrow crypto without credit checks on KYC protocols. The fixed interest rate system ensures that you know what you are paying for. The platform places 10% of the interests from borrowers in an insurance fund to secure collateralized loans that are not liquidated.

Cream Finance

Cream finance is an open-source permissionless protocol that serves users on Ethereum, Fantom, and Binance Smart Chain. Users can make money in just a few clicks by selecting the right borrowers using custom smart contracts. The protocol that was established in August 2020 by Jeffrey Huang is governed by decentralized independent company.

Truefi.io

Founded in 2017, Truefi.io offers uncollateralized crypto loans where users earn high yields at sustainable rates. Investors can add the platform’s native token TRU into a lending platform and earn yields from farming TRU. Unused capital is placed in a pool from where borrowers access funds at interest.

Custodial Crypto Loan Platforms

Custodial crypto loan platforms enable borrowing and lending directly from trusted third parties. The third-party holds control of your funds throughout the loan’s tenure and is counterparty at every transaction. The custodial platforms control the interest rates and the order books used by borrowers and lenders. The most popular custodial crypto loan platforms include:

Nexo

Nexo is a popular Centralized Finance loan platform famed for offering a $375 million insurance policy on their custodial assets. The platform has over 1.5 million users and an asset base of $12 billion. The platform supports at least 18 cryptocurrencies and offers a higher LTV and lower borrowing rate than other CeFi platforms.

More info: Nexo review

Celsius Network

The Celsius network has 485,000 users and an asset base of over $10 billion. It offers low borrowing rates beginning at 1% and supports at least 25 different digital assets.

More info: Celsius Network review

BlockFi

BlockFi is a U.S-based CeFi player backed by institutions like Ventures, Galaxy Digital, Winklevoss Capital, and Fidelity. According to Motley Fool, the crypto loan platform is perfect for beginners in CeFi.

Binance Loan

Binance loan primarily facilitates Bitcoin purchases while offering crypto-backed loan services at favorable rates. The platform provides a wide variety of cryptocurrencies to choose from, and users can make flexible deposits at their convenience.

Huobi Loan

Huobi loan allows its verified customers to collateralize their crypto assets and borrow cash or cryptocurrencies. Borrowers can withdraw and use their borrowed funds or use them for margin and futures trading.

The Best Crypto Loan Platform Overall

Crypto-backed loans are a part of a rapidly growing ecosystem, and cmartcredit.io has already cut out a niche as a major industry player. The rapidly growing platform is user-friendly and leverages customer assets just like a modern banker.

Not only does the platform offer lower collateral compared to other industry players, but smartcredit.io also focuses purely on peer-to-peer lending, among other benefits. The platform offers loans automatically controlled by a matching engine that connects lenders to the right borrowers.

Being a leader in the industry, smartcredit.io has created an internal “credit score” that users a customer’s social media presence and blockchain history, among other factors. Users with favorable scores benefit from lower interest rates making it more popular among users. Users of smartcredit.io can enjoy fixed-term loans, fixed-interest loans, and fixed income funds, among other DeFi offerings.