The world of finance is evolving, and cryptocurrency is playing an increasingly important role. One exciting development is the ability to secure loans using crypto holdings as collateral. This enables you to access liquidity without selling your crypto assets, making this an attractive option for investors who believe in the long-term growth potential of their crypto holdings.
This guide will walk you through the process of securing loans using cryptocurrency, highlighting the pros and cons and providing a step-by-step approach with APX Lending.
Understanding Crypto-Backed Loans
Crypto-backed loans are a new type of loan that use cryptocurrency as collateral. This means you can borrow money without selling your crypto assets, allowing you to retain their potential for future growth.
This option is becoming increasingly popular for several reasons:
- Avoid capital gains tax: Selling your crypto can trigger capital gains taxes. By using it as collateral, you can access liquidity without incurring these taxes.
- Retain investment potential: You continue to own your crypto, allowing you to benefit if its value increases while you repay the loan.
- Access liquidity: If you secure loans using crypto, it provides a way to access cash without selling your assets, offering flexibility for various financial needs.
Eligible Crypto as Collateral
Not all types of crypto are suitable for use as collateral for loans. Lending platforms typically select eligible assets based on specific criteria to ensure stability and liquidity for smooth loan transactions.
One key factor is market stability. The chosen coin should have a proven track record and significant market presence, minimising the risk of drastic fluctuations that could impact both the borrower and the lender.
Security and transparency are equally important. The underlying blockchain technology should be robust and well-established, with a proven track record of resilience against attacks and manipulation. The issuer of the cryptocurrency should also have clear and transparent practices, fostering trust in the lending process.
Based on these criteria, APX Lending currently accepts Bitcoin (BTC) and Ethereum (ETH) as collateral. These established and reputable cryptocurrencies offer the stability and liquidity needed for secure and reliable loan transactions. As the crypto market matures, the list of eligible assets may evolve to include new options that meet APX Lending's stringent Know-Your-Product standards.
How to Apply for a Crypto Loan with APX Lending
APX Lending offers a straightforward and efficient application process to secure loans using crypto. Here's a step-by-step guide:
- Create an account.
Begin by visiting the APX Lending website and navigating to the "Sign Up" section. All you need is an email address to get started!
- Select loan parameters
Here, you'll choose your desired loan amount in USDC,, the term (duration) you are looking for, and the LTV at origination you require. Finally, select your preferred collateral from the available options: Bitcoin (BTC) or Ethereum (ETH). You will then fill out the pre-approval form, which should take no more than 5 minutes to complete.
- KYC ID
Once your loan has been pre-approved, you will be required to fill out your personal details and contact information. You'll be asked to complete your verification process, which may involve submitting a government-issued ID and proof of address.
- Loan approval
Once your loan application has been approved your loan agreement will be emailed to you. Carefully review the loan agreement, which outlines the terms and conditions of your loan, including loan interest rate, repayment schedule, and any applicable fees. Ensure you understand all the details and ask any questions you may have before proceeding. Once you're okay with the terms, electronically sign the agreement to finalise the loan application. There's no credit check involved.
- Deposit collateral
The next step involves transferring the required amount of your chosen cryptocurrency collateral to APX Lending. The platform will provide clear instructions and a secure wallet address for your chosen collateral (which shall also be recorded in your loan agreement).
- Receive funds
Once the collateral has been received, APX Lending will verify the deposit and your loan will be disbursed quickly and securely. The funds will be transferred directly to your designated bank account or crypto wallet. You can access and manage your loan details through your APX Lending account dashboard.
This streamlined process allows you to efficiently access the liquidity you need without selling your assets. APX Lending prioritises user experience and ensures a smooth and transparent application process for crypto-backed loans.
Benefits of Using Cryptocurrency as Collateral
Leveraging your crypto holdings as collateral for loans offers several distinct advantages over traditional methods:
1. Retain Investment Potential
One of the key benefits when you secure personal loans using crypto is that you retain ownership of your crypto assets.
2. Avoid Capital Gains Tax
Selling crypto assets can trigger capital gains taxes, which can be a significant financial burden. By using your crypto as collateral for a loan, you can access the liquidity you need without incurring these taxes. This allows you to utilise your crypto holdings strategically without facing the immediate tax implications of selling.
3. Competitive Interest Rates
APX Lending offers some of the most competitive interest rates on the market for crypto-backed loans, making them a cost-effective option compared to our competitors. This allows you to access the funds you need without incurring high-interest charges, making it a financially viable way to leverage your crypto holdings.
4. Flexibility
APX Lending provides flexibility in choosing your loan amount and term. You can customise the loan to fit your specific requirements, whether you need a short-term bridge loan or a long-term financing solution. This level of customization ensures you can access the liquidity you need without unnecessary financial constraints.
Repayment Options and Security Measures
APX Lending offers flexible payment options that allow you to choose to pay your interest or your loan principal by selling the collateral you have already deposited with us, instead of sending payments every month or at the end of the loan term. This convenient option makes it easier to make payments on your terms. Together with our competitive interest rates we ensure that you get the best value for your loan.
Security is paramount, and APX Lending takes robust measures to protect your collateral. We utilise advanced security protocols and transparent processes to ensure your assets are safe and your loan status is always clear. APX Lending is currently undergoing our SOC 2 audit, further establishing us as the most compliant and secure crypto-backed lending platform on the market.
Crypto Loans FAQs
Can you secure loans using cryptocurrency?
Yes, you can leverage your crypto holdings as collateral to secure a loan. This allows you to access liquidity using your crypto assets without selling them.
Is borrowing USDC safe?
USDC is a stablecoin pegged to the US dollar, offering a degree of stability compared to other cryptocurrencies. However, it's important to choose a reputable crypto lender like APX Lending that prioritises security and transparency. It is also important to understand that USDC, like all cryptocurrencies, is still a nascent financial product and has in the past de-pegged from the US dollar. Make sure that you always understand your responsibilities and the risks associated with crypto-backed lending.
Are crypto loans insured?
Currently, there is no standard insurance for crypto loans. However, we hold your collateral with insured and licensed custodians that offer up to 350M USD of insurance. APX Lending always employs the most stringent security measures to protect your collateral.
By using crypto-backed loans, you can access the value of your digital assets while retaining control of your crypto. This method allows you to obtain liquidity without having to sell your holdings, making loans secured by your cryptocurrency an effective financial tool.
APX Lending is a crypto lending platform that offers a streamlined and secure process, making it easy to access liquidity while retaining the potential of your holdings. Get started now!
APX Lending is a crypto-backed lender operating in the US, Canada, and globally. APX Lending does not offer financial or tax advice. We strongly encourage you to consult with a certified financial or tax professional for guidance on any related inquiries you may have.
