It’s an open secret that the fast-growing DeFi lending sector has become a top-performing industry in the crypto sphere and is disrupting the conventional banking industry. Crypto loan platforms have rescued millions of people who were denied low-interest collateral-backed loans for personal or business use by traditional banks as they couldn’t raise enough collateral.
Use Cases for Crypto Loans
Suppose you’re willing to think outside the box and put aside the idea that cryptocurrencies are only suitable for speculation. In that case, you’ll discover several use cases for crypto loans that you can avail. Apart from yield farming and staking, DeFi lending is an innovative collateral-loan lending savior that disrupts the traditional banking sector’s complications and lack of transparency. Join us now as we explore several extreme use cases for crypto loans:
Yield Farming with Crypto Loans
Use your idle crypto assets as collateral to borrow cryptocurrencies which you can use to earn variable or fixed interest by lending cryptocurrencies in the DeFi market. The process involves leveraging DeFi protocols to lend cryptocurrencies for high returns that can go up to 100% in annualized yields. The practice of yield farming originates from banks’ process in lending your deposits; the difference is that DeFi yield farming compounds the interest earned.
Buying a Home with Crypto Loans
Among the now-widespread use cases for crypto loans are going for home loans with crypto as collateral. Unlike the traditional mortgage, you avoid income tax and capital gains taxes, meaning that you save on the tax item in most countries.
In the worst-case scenario where you’re unable to repay the loan, you’ll only lose your collateral, which the lender will sell to get their cash back, but you still keep the loan and your home. Other benefits of crypto home loans include:
- You own your crypto for the long-term
- Enjoy tax benefits
- Instant loan without credit the annoying checks
Buying a Car with Crypto Loans
Are you contemplating acquiring a new car? You can leverage your crypto as collateral to finance the purchase. The practice is becoming among the leading use cases for crypto loans. You’ll receive the loan in the form of fiat currencies like the Euro or dollar. As long as you have some crypto assets, it doesn’t matter if getting an auto loan was impossible due to not-so-perfect credit ratings. Let your cryptocurrency work for you as you drive off with the car of your dreams.
Day Trading with Crypto Loans
Crypto investing and crypto trading are two completely different concepts, mainly differentiated by time horizons. Day trading as a use case for crypto loans can enable you to make quick profits compared to investment changes in your portfolio once a year.
Collateralize your crypto assets to borrow different cryptocurrencies, which you can buy and sell within the same day for quick profits. Day traders can buy and sell from trusted online brokerages taking advantage of price fluctuations, return the borrowed digital assets, and walk away with more funds earned from nothing but ingenuity.
Broaden Your Crypto Assets with Crypto Loans
Despite their volatility, the cryptocurrency market is still rife with investment opportunities. Take Bitcoin, for instance. From $17,000 in 2017 to $3,500 in 2019 and a high of close to $56,000 in October 2021 per coin, you can take a loan offering your BTC as collateral so you can diversify your cryptocurrency portfolio. Keep your tab on other smaller cryptocurrencies that are gaining value and create a profitable, broadened portfolio that suits your investment needs and personality.
How Crypto Lending Works
There are three parties in the crypto lending process: the first party is the lenders, the aficionados whose intention is to grow their digital assets by reaping profits from P2P lending. Crypto lending platforms like smartcredit.io represent the second party that acts as a link between lenders and borrowers. As a decentralized platform, Smartcredit.io doesn’t keep custody of a borrower’s collateral. The borrower is the third party; they receive funds to implement in different use cases for crypto loans. The steps involved in the crypto lending process are:
- You visit the crypto lending platform and make a loan request
- You stake your collaterals once the platform accepts your request (You can’t retrieve the collateral until you repay the loan)
- The lender automatically funds the loan
- The lender receives regular interest payments
- You get back your collateral as soon as you pay off the loan.
What are Crypto Loan Rates?
DeFi platforms offer different annual yield rates for cryptocurrency investments. Other crypto coins have varied crypto loan rates depending on the cryptocurrency you’re HODLing. On average, DeFi lenders charge between 3% and 8% for crypto coins and 10% and 18% for stablecoins.
Pros and Cons of Crypto Loans
Now that you’ve seen some prominent use cases of crypto loans and how easily DeFi lending works, let’s consider some of the advantages and disadvantages of the system.
- Fast loans
- Hassle-free loan delivery
- No intermediaries
- Easy access to the loan market
- Direct control on your assets
- Attractive to lenders
- Automatic process
- Market transparency
- Analytical efficiency
- Immutability and anonymity
- Risk of hacking smart contracts
- Regulatory issues
How to Use Crypto Loans with SmartCredit.io
Crypto lending, as availed by Smartcredit.io, offers you an easy way to earn passive income from the cryptocurrency that’s sitting idle in your crypto wallet. If you’re not planning to sell your digital assets any time soon, that’s well and good, but it doesn’t mean that you can’t gain some value from them. Take advantage of this great opportunity and make some money to pay your debts or cover your extra expenses by beginning the crypto loan process at Smartcredit.io. Visit our crypto loans page to know more.