Our last post spoke about the differences between the peer to peer lending and Crypto lending if you didn’t get a chance to check here is the link. Taking a step further today we would talk about different types of crypto-backed loans available in the market.
The crypto assets market is still in evolving phase, and earlier where the crypto world only witnessed holders and miners as the market participants, another group emerging in cryptosphere of – issuers, investors, lenders, borrowers demanding exotic flavors in lending services. The flavors available now are in a basic form that allows holders of crypto assets to generate income from interest earned.
Types of Crypto-backed loans
The arrangement works for people who have spare crypto and are not using at any time. Just lend your Bitcoin or Ether, or Altcoins agree to the smart contract and earn an interest rate for a given period of time. It helps users or businesses to earn extra cryptos just by lending it.
The model works with businesses/users who are holders of cryptocurrency and in need of Cash. So the cryptocurrency like Bitcoin, Ether or Altcoin work as collateral and the user gets the cash in hand. The cash amount is usually credited to the bank account linked, the borrower needs to make monthly payments and once the amount is fully paid the collateral is reimbursed.
Certain kind of conditions are applicable in case of Crypto to cash lending like in case if the collateral price is dropped by a specific percentage say 25-30, the lending service platform can request for more capital.
Firm offering Crypto to Cash Lending – Unchained Capital, SALT Lending
It is a unique service offered currently by Bitfinex, which allows individuals/users to fund in multiple currencies to Bitfinex traders. The interest rate, duration could all be decided by the individual who is funding it.
In such case, a user could earn a passive income by lending USD/cryptocurrency depending upon the trade volume and price at a given time.