Despite popular knowledge, trading cryptocurrencies is not the best and only way to earn a profit by leveraging your current holdings.
Rather, the market offers several other investment tools, such as digital currency lending, which enables borrowers and lenders to transact money between one another in an ecosystem that ensures good interest rates, alongside a sufficient degree of safety.
As the cryptocurrency market continues to develop, traditional financial instruments are now making their way onto this emerging market.
As such, crypto users can now engage in margin lending, crypto-to-crypto lending, and crypto-to-fiat lending, for the purpose of either earning an interest rate on coins that are being lent out, or to get access to fiat/crypto for investments, larger-scale purchases, or day-to-day expenses.
This article will focus on highlighting the main aspects worth taking into consideration when dealing with the crypto lending market, while also featuring an in-depth analysis of the main digital currency lending platforms available on the market.
How Crypto Lending Works
- 1 How Crypto Lending Works
- 2 Top Crypto Lending Platforms
- 2.1 Nexo
- 2.2 BlockFi
- 2.3 CoinLoan.io
- 2.4 YouHODLER
- 2.5 Crypto.com
- 2.6 Celsius.Network
- 3 Bottom LIne
The crypto lending process is straightforward on most platforms offering this service. Lenders will deposit part of their crypto holdings on the platform. The coins are then made available to borrowers at a pre-set interest rate.
Borrowers can then create an account and take on a loan for a specific period of time. Once the lending time has expired, the borrower will return the funds and pay an interest rate on top for the service.
To ensure trustworthiness and help mitigate risks such as borrowers being unable to pay back their loans, most crypto lending platforms implement guarantees or set up collateral or loan backing systems.
Most borrowers utilize such services for two reasons: day-to-day expenses or margin trading. While day-to-day expenses are pretty self-explanatory (a process that is prevalent in the traditional financial market), margin trading entails the use of borrowed funds in order to make riskier and higher-value trades.
Thus, in case a proper trading decision was taken, the trader will receive a higher profit. In the case of a bad deal, the trader will have to pay for the losses out of their own pocket, while ensuring that the loan is paid back.
There are several advantages to crypto lending. These include:
- Extremely low transaction fees
- No need to fulfill excessive bank conditions
- Reduced bureaucracy
- No need for a bank account
- Diversified loans
- Very few limits on which services can be used based on factors such as nationality or citizenship
- Quick approval times.
On the other hand, there are also several risks associated with crypto lending. These include:
- Lending platform safety
- A higher default rate on repayments when compared to fiat
The inherent volatility of the cryptocurrency market, which might entail that debtors pay back considerably more than they borrowed, whereas lenders may sometimes lose profits due to excessive volatility.
Top Crypto Lending Platforms
Without further ado, here is our in-depth analysis of the market’s most popular cryptocurrency lending platforms:
At this point in time, Nexo is regarded as one of the most popular crypto lending companies active on the market. According to its website, Nexo has processed over $700 million-worth of transactions, for more than 200,000 users.
Thanks to its compliance efforts, it is available in over 300 jurisdictions, while supporting more than 45 fiat currencies. $1+ billion worth of instant crypto loan requests were processed during its 10 years of online lending.
The company’s vision entails identifying and solving a variety of inefficiencies that are apparent on the lending market, through the use of blockchain and other innovative technologies.
Nexo offers an instant crypto credit line, which allows users to borrow money without needing to go through a credit check, by putting their cryptocurrency up as collateral.
Nexo’s business model embraces the use of mechanisms meant to help unlock the value of digital assets while retaining ownership of crypto through low-cost and tax-efficient credit lines. Quick access to cash is provided thanks to the implementation of blockchain technology, which also ensures operational safety for both lenders and borrowers, since lending is carried out through blockchain-based smart loan contracts.
Nexo also offers a credit card, which allows debtors to easily access their credit line anywhere in the world. The Nexo card can be used to make ATM withdrawals or to directly pay for products & services at online and offline retailers. F
ree unlimited virtual cards are offered, alongside cashback on all purchases. At the time of writing, the Nexo card does not entail FX, monthly or annual account management fees apart from the loan’s interest rate. Users will have to pay an interest rate starting from 5.9% APR.
Nexo is also a great solution for investors. The crypto lending platform allows users to earn 8% interest on EUR, USD and GBP deposits, which are 100% asset-backed. Thus, investors are offered the opportunity to earn a high-yield passive income on their savings.
Access to funds is instant, unlike most traditional banks and many alternative lending platforms. Additionally, Nexo features a daily compounded interest on all deposits, alongside custodial insurance of up to $100 million on each deposit.
Interest rates are also available on stablecoins, such as USDT, TUSD, USDC, PAX, and SAI.
Ease of use
The lending process is very straight-forward: Borrowers must transfer a specific amount of crypto to their NexoOracle account (bound to serve as collateral). Then, the loan is instantly received to your Nexo account.
The money can then be accessed via the Nexo card, or by withdrawing it to a bank account. Once the loan time is up, the funds must be repaid with an interest rate (repayments are quite flexible, as they can be made at any point in time, and in whichever amount the user can afford).
Once the process is finalized, the loan contract will allow users to withdraw the initial coins that have been deposited as collateral.
Some of the main digital currencies that are supported by Nexo include, but are not limited to: Bitcoin, Ethereum, the Nexo token, BNB, XRP, Litecoin, Tron, Stellar, Bitcoin Cash, EOS, Cardano, Dash, IOTA, Ethereum Classic, Zcash, Tezos, Monero, VeChain, KIN, NEO and Tezos.
Read our full Nexo Review here.
Founded in 2017, BlockFi represents a New York-based lending institution that provides customers with USD loans which are guaranteed via crypto-based collateral.
BlockFi’s main mission is to help provide increased liquidity on the cryptocurrency market, while also helping debtors better afford their day-to-day expenses. At this point in time, numerous traders rely on BlockFi’s services for the purpose of margin trading.
Since its initial inception in 2017, BlockFi’s popularity quickly rose, thus transforming the company into one of the most valuable players on the US crypto lending market.
In terms of its lending services, BlockFi is quite similar when compared to some of the other platforms that are active in this market. As such, the platform offers a 50% loan to value (LTV), available at a starting interest rate of 4.5%. The interest rate for debtors may vary based on the amount that is being borrowed and other factors such as the minimum loan amount or the origination fees. The exact sum that must be paid back does not fluctuate in time, and users are aware of it from the moment they sign the virtual loan contract.
The typical loan duration for BlockFi is of 12 months, and there are several options that users can take advantage of in order to either prepay the loan or to refinance debt at the end of the payback term.
According to BlockFi, it seems that some of the main use cases for their lending services include, but are not limited to: real estate investments, purchasing a car, traveling throughout the world while using crypto to pay for the expenses, diversifying one’s investment portfolio, or paying back credit card debt.
Apart from the standard lending feature, BlockFi also offers a trading platform, which can be used to trade several crypto pairs, including BTC, ETH, LTC, USDC, and GUSD.
Cryptocurrency holders that would like to further increase the value of their coins may want to consider depositing a part of their holdings on BlockFi, in exchange for a yearly interest rate of up to 8.6%. Compounded interest is available for BTC, ETH, USDC, and GUSD.
Here are several quick aspects worth noting: BlockFi offers institutional backing, and pays the interest directly in crypto. Additionally, there is no ICO token required to use the platform, nor are the deposited funds used to lend exchanges.
Ease of use
The platform is quite easy to use. First off, future BlockFi borrowers must create an account on the platform. Then, they can opt to deposit a specific amount of cryptocurrency as collateral, in order to access a crypto loan. Requesting a loan is a seamless experience that is generally finalized within a few clicks. The credit line is then instantly open, and the money is deposited into your account.
Currently, BlockFi supports Bitcoin, Ether, and Litecoin as collateral. However, the platform works with stable coins as well, such as USDC or the Gemini dollar (GUSD).
Read our full BlockFi review.
CoinLoan.io represents an Estonian peer-to-peer lending platform for crypto-collateralized loans. It has become one of the most popular European crypto lending platforms, granted that it provides users with a simple lending process, alongside bank-grade security, multiple cryptocurrency support, and of course, the P2P system.
CoinLoan.io offers a simple lending service, which entails that borrowers deposit a specific amount of cryptocurrency that will serve as collateral. A credit line is then opened, at a loan-to-value ratio of approximately 70%, depending on several conditions, such as loan amount, collateralized crypto, etc.
Transparency represents one of the main benefits of this platform. With this in mind, prior to making a borrowing decision, potential debtors are presented with the exact numbers for the lending contract.
For instance, at the time of writing, a 10,000 EUR loan, with a term of 7 days will entail that borrowers deposit 1.60 BTC as collateral. The total interest amount is 23.33 EUR, whereas the interest rate will be 12%. An additional service fee of 100 EUR will also be charged for this specific transaction. Currently, loans are offered for up to 3-year terms.
Borrowing via Coinloan.io will yield several benefits for borrowers. These include the possibility to preserve crypto assets in case you are holding them as an investment, no credit checks whatsoever, flexible lending conditions, alongside convenient methods of withdrawal.
Repayments can be made all at once, or every month.
The lending instrument provided by this platform is suitable for borrowers looking to cover their day-to-day expenses, margin traders, legal entities and even institutional investors. Collateralized cryptocurrency can be protected in the case of market price falls through early loan repayments, or increased collateral meant to decrease the current LTV.
Those who are interested in using CoinLoan to turn in a profit will be happy to know that the platform offers a worldwide, reliable and easy-to-use service for creditors.
Interest rates tend to vary based on several factors, yet the company advertises a 9% APR interest rate for most deposits. Creditors can withdraw their funds at the end of the loan term through several payment methods including SWIFT and SEPA bank transfers, or AdvCash.
CoinLoan providers lenders with several guarantees: the company is legally registered and licensed in the European Union, meaning that it is subject to the EU financial law which offers advantageous protection to consumers. Repayments are guaranteed (in case of no-payment, the collateralized crypto is sold, thus obtaining the required liquidity), whereas all transactions are SSL-encrypted.
The lending platform is compliant with all European AML/KYC policies, meant to reduce money laundering, terrorism financing, and other illegal financial activities, therefore verifications are put in place.
Ease of use
CoinLoan.io is easy to use for both creditors and debtors. As such, to gain access to a crypto credit line, borrowers will need to create an account and finalize the AML/KYC procedure. A deposit can then be made via the supported cryptocurrencies.
Users are then allowed to select their preferred loan conditions, such as the desired credit amount, loan currency, interest rate, and loan term. A higher interest rate generally leads to a quicker loan acceptance. Users can then generate a P2P lending request, or accept one of the offers that are already available on the marketplace.
A similar procedure is put in place for lenders as well. Once the account is created, lenders will have to make a deposit in fiat, crypto or stablecoins. The appropriate loan conditions can then be selected. Lastly, creditors can choose to create a loan offer that will be published on the marketplace, or they can simply accept a lending request.
Borrowers can make their deposits in BTC, BCH, ETH, LTC, XMR, CLT, and ONT. In terms of creditors, the platform accepts deposits made in traditional fiat currencies such as USD, EUR, GBP, and RUB, cryptocurrencies (BTC, BCH, ETH, LTC, CMR, CLT, ONT) and stablecoins (USDT, TUSD, USDC, DAI, PAX).
Based on this, CoinLoan offers one of the market’s largest choice of cryptocurrencies, fiat, and stablecoins.
Read our full Coinloan Review here.
YouHodler represents a Cyprus and Swiss-based company that focuses on providing lending services for cryptocurrency ‘HODLERS’ throughout the world.
It offers several services, including but not limited to instant crypto loans, the turbocharge system which allows users to borrow a considerably-higher amount of digital currency, interest for depositors, and the MultiHODL system, which acts as an instrument designed to multiply user funds by leveraging risk.
YouHODLER also offers a cryptocurrency wallet app, which can be used to store, exchange and spend up to 12 cryptocurrencies, 4 stablecoins and 2 fiat currencies.
So far, over $20 million-worth of EUR, USD, USDT, and BTC have been processed by the platform for more than 10,000 customers.
YouHODLER’s lending features are quite similar when compared to most market competitors. One of the key advantages of this platform is its high and flexible Loan-to-Value (LTV) rate, available at 90%, 70%, and 50%. Thus, users can obtain higher credit lines for lower deposits, unlike some of the other solutions.
For instance, crypto collateral of 1BTC will yield a loan amount of $8.8K, with an LTV of 90%, and a duration of 30 days. Loan terms can be extended at any time, as long as an extra fee is paid.
YouHODLER grants users access to instant cash provided by the company’s fiat-based funds. Thus, there is no need to look for and find a creditor, unlike P2P crypto lending platforms. Safety is guaranteed thanks to the proven custodian solution, alongside the $1 million security fund. Loans can be accessed both via desktop computers, but also via YouHODLER’s Android and iOS mobile apps.
YouHODLER does not have hidden fees, as it prides itself with transparency. Thus, prior to signing a loan contract, users will get access to an overview of their loan terms & conditions.
The platform allows cryptocurrency users to earn a profit on their cold assets. Up to 12% yearly interest can be earned on a monthly basis by depositing several cryptocurrencies into the YouHODLER wallet. Payouts are made in either crypto or stablecoins, whereas deposited savings are guaranteed via the $1 million security fund. Depositors also have the option to utilize their savings funds as collateral for the purpose of lending liquidity.
Currently, 12% APR is given on stablecoins, followed by 7.2% APR for BTC-based deposits, and 4.2% APR on BNB deposits.
Ease of use
Utilizing this platform is bound to be a seamless experience, due to the friendly design and numerous user tools. To access a loan, users will have to create an account and transfer collateral into the YouHODLER wallet. Once the loan conditions are set, application approval takes a few seconds. Funds can be accessed in EUR, USD, USDT and BTC. The main withdrawal options include SEPA/SWIFT bank wire transfer, MasterCard/VISA credit card transfers, and crypto address withdrawals. Monthly or full repayments can then be made until the loan amount is covered. Users are then free to withdraw their collateralized coins.
Loan management solutions are also offered. These include the option to increase the LTV, manage loan duration, set a take profit price, extend the price down limit, close without repaying, or borrow additional Bitcoin.
Collateral deposit options include BTC, ETH, BNB, XRP, XLM, LTC, BCH, BSV, DASH, EOS, LINK, REP, and BAT. Loans are offered in EUR, USD, USDT and BTC.
Interest-oriented deposits can be made in USDT, USDC, TUSD, PAX, BNB, and BTC.
Founded in 2016, Crypto.com represents a cryptocurrency financial platform, offering several services, including but not limited to exchange-based trading, investment tools, a crypto payment acceptance system for merchants, a Visa credit card and a crypto lending platform.
The company’s vision is to help accelerate the world’s transition to digital currency usage. So far, the platform has achieved several goals, thus improving its overall market popularity. In the future, Crypto.com aims to further improve their services, while expanding its credit card coverage in other regions of the world as well (such as Europe and Asia).
Similarly to some of the other companies involved in this market, Crypto.com offers a fast and easy-to-use cryptocurrency lending system. With this in mind, users get access to instant credit that is ready to spend, without needing to go through complicated application procedures, such as credit checks. In fact, there is no repayment deadline whatsoever on loans.
The system is quite simple and entails that users deposit a specific amount of cryptocurrency that will serve as collateral. At this point in time, Crypto.com offers loans equal to 50% of the amount of crypto that has been deposited. As such, if a user deposits $100,000 in one of the supported digital currencies, they will get to access an instant credit line of $50,000 in PAX or TUSD.
The cash can be accessed via the Crypto.com Visa credit card. Currently, there are several card tiers that users can opt for. The free card only offers access to the credit line, alongside a 1% MCO reward on all spending done via the card. Those who decide to put up a larger MCO stake will gain access to numerous benefits, such as free Spotify and Netflix subscriptions. Other benefits include LoungeKey airport lounge access, larger monthly ATM withdrawal limits, lower interbank exchange rates, alongside Expedia, or Airbnb promotions.
Just like most other digital currency lending platforms, Crypto.com also offers investors the possibility to receive interest on their deposits. As such, 8% interest is given on crypto deposits, whereas stablecoin deposits receive up to 12% interest yearly.
Yearly interest rates depend based on the amount of MCO that is being put up as stake. With this in mind, a 50 or less MCO stake will lead to slightly lower interest rates.
Ease of use
This lending platform has invested considerable resources into ensuring that it provides users with a seamless experience. As such, the platform can be accessed via desktops, alongside the app available for iOS and Android devices.
To lend cryptocurrency, users must create an account, and then proceed to deposit a specific amount of crypto, in one of the supported coins, which will serve as collateral. An instant credit line is then created, which can be accessed via the Crypto.com Visa card.
At this point in time, Crypto.com accepts the following cryptocurrencies as lending collateral: BTC, ETH, XRP, MCO, CRO, and LTC.
Investors looking to deposit cryptocurrency in exchange for a yearly interest can opt for Bitcoin, Ethereum Litecoin, XRP, Binance Token, ChainLink, Maker, Pax Gold, TrueUSD, Paxos Standard, USD Coin, Tether, alongside several others. Crypto.com is constantly working towards increasing the number of supported coins and tokens.
The Celsius Network is without a doubt, one of the most popular cryptocurrency lending choices available on the market right now. The startup was founded back in 2017, for the purpose of harnessing the potential of blockchain technology in order to offer consumers economic opportunities, financial freedom, and income equality.
So far, the Celsius Network has processed over $4.2 billion in loan originations and is responsible for handling $300 million in assets. Currently, there are 40,000+ active wallets on the platform, thus making it one of the most popular crypto lending services.
The Celsius Network represents a great choice for individuals, traders, investors and private entities that require increased liquidity, yet are unwilling to sell their cryptocurrency. As such, the platform facilitates collateral-based crypto credit lines.
Currently, users have the option to deposit their collateral in several popular cryptocurrencies, at a Loan-to-Value (LTV) rate of 25%, 33%, and 50%.
Users can choose from several loan terms, these being 6 months, 1 year, 2 years and 3 years. Interest rates for borrowing tend to depend on the factors that have been highlighted above.
As such, a $1,500 loan (0.61 BTC in collateral, 25% LTV, and over a term of 6 months) will entail an interest rate (APR) of 3.46% if paid via Celsius.Network’s proprietary token (CEL), or 4.95% if paid via fiat.
Celsius.Network currently offers a minimum loan of $1,500. The lending agency does not mention a particular maximum, yet larger loan requests may be subject to manual approval. Interest rates start at 3.47% APR, whereas loan terms can be extended for free, at any time. Currently, there are zero fees or penalties that borrowers may be subject to. As such, failure to pay back the loan (alongside not extending the term), will lead to the sale of the deposited collateral.
Similarly to most other crypto-based lending platforms, there is no credit check. Loans are generally approved within a few minutes, whereas the application process takes no longer than 60 seconds.
The Celsius.Network offers users access to several other services, including the CEL Token (an in-app utility token that offers user benefits and which can be used to pay for the platform’s services), alongside the CelPay platform, which serves the purpose of empowering the instant transfer of several cryptocurrencies to all people.
This platform is also well-suited for those interested in earning a profit on the cryptocurrency they currently own. As such, users can choose to deposit over 25 cryptocurrencies and earn a yearly interest of up to 12%.
Do keep in mind that the interest rate varies based on several factors, such as the amount being deposited, the coin of choice, the term, and whether the interest is to be received in fiat or the CEL token. Interest rates are significantly higher if users opt for the CEL token. For instance, a Bitcoin deposit can yield a 2.53% yearly fiat-based interest rate, or an 8.43% yearly CEL token interest rate.
At this point in time, there is no minimum or maximum deposit. Accessing the interest service is free of charge, whereas the funds are never locked up. Thus, depositors can always withdraw their coins.
Ease of use
The Celsius.Network prides itself with an intuitive user interface that is very easy to use. As such, obtaining a loan entails that users create an account and go through the KYC procedure. The platform has opted for a Typeform-based application process that can be completed within 1 minute. It requires users to select their loan terms, and make the deposit. Shortly afterward, the credit line will be opened, thus allowing users to withdraw the funds via several payment options.
From this point onwards, monthly repayments can be made until the full amount is covered. At the end of the loan term, the collateralized crypto can be withdrawn. Clear data on repayment due dates and interest rates is available at all times.
Borrowers can deposit their collateral in several coins, including Bitcoin, Bitcoin Cash, Ethereum, Ripple, Litecoin and Dash. Loans are given in Tether, Fiat, TUSD, CEL tokens, and a few other stablecoins.
Users who are looking to earn interest on their coins can opt to deposit: CEL, BTC, ETH, LTC, XRP, OMG, BCH, ZRX, BTC, ZEC, XLM, DASH, TUSD, GUSD, PAX, USDC, DAI, ORBS, USDT, TGBP, TAUD, TCAD, THKD, EOS, MCDAI.
We can easily conclude that the Celsius.Network is one of the most crypto-inclusive lending platforms, thanks to its numerous supported coins.
Based on everything that has been highlighted so far, the cryptocurrency market offers a plethora of digital currency lending services.
The platform infrastructure and lending process are similar for all market competitors, yet there are several key differences that must be taken into account when choosing a crypto creditor.
Thus, platforms generally offer diverse LTV rates, interest APRs and loan terms. Similarly, there are significant differences in terms of supported cryptocurrencies, hence it’s best to opt for a platform that accepts your favorite coins.
Last but not least, we advise that you carefully read the terms & conditions for all crypto lenders that you are considering working with. Similarly, it’s best to check your local laws, to determine whether crypto-based loans are legal in your jurisdiction and your tax requirements when taking out a loan.