One of the benefits of investing in cryptocurrency is the ability to use your crypto holdings as collateral for a loan, even if your holdings are relatively small. In traditional markets, a similar practice is called securities-based lending, but it is typically off-limits to all but high-net worth clients of private banks and large financial institutions.
Crypto loans are much more accessible, and they offer “hodl” investors a way to achieve liquidity from their investment without selling it.
Crypto enthusiasts are often encouraged to “HODL” their assets — keeping them safe in a wallet until the price of their chosen currency appreciates. But just like you’d feel uneasy about leaving your cash sitting around in a bank with low interest rates, a common question is this: how can you get your digital currency to grow?
This is where crypto lending comes in. Not only can it enable savers to receive interest on their stash of Bitcoin, but it enables borrowers to unlock the value of their digital assets by using it as collateral for a loan.
VGC Crypto Lending Explained
When investing, one of the biggest challenges can be cash flow — and there’s nothing worse than having to raid the capital you’ve got tied up in assets for short-term costs and lack liquidity.
Let’s imagine that John has 2 BTC. He doesn’t want to sell any of it because he’s confident that prices are going to appreciate substantially. John is also worried that, if he does end up offloading his crypto, there’ll be a risk that he ends up with less Bitcoin when he buys it back at a later date.
This is where VGC comes in to rescue here. Typically, John will be given the opportunity to use his Bitcoin as collateral — and receive a loan in stablecoins. Owing to the volatility of digital assets, he’ll normally have to “overcollateralize,” meaning he’ll have to lock up more BTC than the overall value of the funds he’s receiving.
Once he’s repaid back the loan, plus interest, his crypto will be returned in full — and he’ll make a handsome profit if BTC ends up appreciating as he predicted. His crypto would only be at risk if he failed to keep up with the loan’s terms, or if the value of the Bitcoin held as collateral fell below the value of the loan he received.
Unlike personal loans or credit cards, collateralized loans are much more secure for the lender, which enables the borrower to take advantage of cheap interest rates.
Cryptocurrencies can be very volatile, which is why these loans are almost always overcollateralized. This provides insurance for the lender should the price of crypto plummet.
One of the major bonuses many see in a crypto loan is that, unlike traditional banking, you won’t be subject to your credit score being assessed. This means that lending is more accessible to people who don’t have a financial history, underbanked consumers who don’t have a bank account and self-employed workers who struggle to access credit because their fluctuating earnings don’t meet a bank’s strict lending criteria. Repayments can also be more flexible.
And whereas it can take several days for loans to clear in the old-fashioned financial world, BTC loans can be practically instant. You’ll also be able to make your assets liquid without triggering a taxable event — and you can adjust the loan to suit your needs.
Members of our community have the opportunity to apply for loans as long as they have collateral in crypto that can match the value of the fiat loan applied for x3. That is, if you need a loan of $50, you must provide the crypto asset that is worth 3 times the value of the amount requested for. E.g $50 loan = 0.002609BTC
This simply means you need to deposit 0.002609BTC as collateral. You are charged 15% interest on the amount applied for.
please read our Terms of Service before proceeding to apply for loans.