If you own Bitcoin, you don’t have to sell it to get cash. A Bitcoin loan allows you to borrow against your crypto while keeping your digital assets in your portfolio. This guide will explain how Bitcoin loans work, why they’re growing in popularity, and what you should know before applying.

How do Bitcoin loans work?

Bitcoin loans let you use your Bitcoin as collateral in exchange for cash.

Instead of selling your BTC when you need cash, you can use it as collateral and receive a loan. But not all lenders are the same. Regulated lenders typically store your crypto in segregated, insured cold-storage wallets with full on-chain visibility. Once approved, funds are usually released in your local currency, such as CAD or USDC.

The loan remains active until you repay it, just like a traditional loan. If the price of Bitcoin rises, your collateral value increases, and you may be able to withdraw part of it or get more loan without posting more collateral. If the price of Bitcoin drops, your loan-to-value (LTV) ratio increases, and you may need to add more collateral or pay back some of your loan to avoid liquidation.

Why choose a Bitcoin loan?

There are several reasons why borrowers choose Bitcoin loans over traditional options:

• No credit checks: Approval is based on your crypto, not your credit score.

• Keep your Bitcoin: Maintain exposure to potential price gains while getting cash.

• Fast access to funds: Many lenders, such as APX Lending, fund loans within 24 hours and with USDC it’s near-instant.

• Regulated and transparent: Some lenders are fully compliant in Canada and the US, offering peace of mind that many lenders can’t match. APX Lending is the only CSA-approved crypto-backed lender in North America, granted exemptive relief by the Canadian Securities Administrators.

Types of crypto loans, explained

Not all crypto loans are the same. Here are the main types you will come across:

Collateralized crypto loans

When people talk about crypto loans, they’re usually referring to overcollateralized loans. These make up the vast majority of crypto lending today. When people talk about crypto loans, they’re usually referring to overcollateralized loans, where you deposit crypto as security and can borrow only a portion of its value. In most cases, lenders set the loan-to-value (LTV) ratio around 50%, meaning if you put up $10,000 in crypto, you can borrow about $5,000. Some lenders, like APX Lending, offer a range of LTV’s at origination, from 20% to 50%. This setup protects the lender against price drops in the collateral, which is why it has become the standard model for most crypto lending today.

Uncollateralized crypto loans

Uncollateralized crypto loans, sometimes called “crypto credit,” don’t require you to put up collateral. Instead, they’re based on things like reputation, credit history, or on-chain scoring. They’re rare because, without collateral, the lender carries most of the risk—if the borrower defaults, there’s nothing to recover. That’s why these loans usually go to institutions, which are seen as more reliable and easier to hold accountable than individual borrowers.

DeFi (decentralized finance) crypto loans

DeFi (decentralized finance) crypto loans are handled by smart contracts, which means the process is automatic and you and the DeFi protocol stay in full control of your wallet. But along with risks like smart contract bugs and no insurance, there’s also no customer support. If something goes wrong, there isn’t a real person to turn to. CeFi platforms like APX Lending offer a safer, regulated alternative, backed by human support teams that can step in to help when you need it.

Loan-to-value (LTV) ratio explained

The LTV ratio determines how much you can borrow against your crypto. It is the loan amount divided by the current market value of your collateral.

For example:

• Loan: $50,000 CAD

• Collateral: $100,000 CAD in BTC

• LTV = 50%

If Bitcoin drops to $60,000, the LTV jumps to 83% (50,000/60,000). If it rises to $150,000, your LTV falls to 33% (50,000/150,000).

LTV matters because:

• High LTV means higher risk of liquidation if prices fall.

• Low LTV means a safer buffer, but less borrowing power.

At APX Lending, you can borrow from 20% to 60% LTV with a liquidation point as high as 90%, giving you more flexibility than most competitors. Plus, you’ll get a soft margin call notifying you when your LTV is above 80% so you’re alerted ahead of time, with no surprises.

Risks of Bitcoin loans

Like any financial product, Bitcoin loans come with risks.

• Price volatility: If the price of Bitcoin drops sharply, your collateral may be liquidated. A good practice is to ask potential lenders how they notify borrowers about looming liquidations, since clear alerts can give you time to act before it is too late.

• Margin calls: You may need to add more BTC if your LTV rises too much.
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• Custody risk: Make sure your lender uses insured, cold-storage custody. It is also important to check for proof of reserves. The best case is full on-chain visibility around the clock. If that is not available, look for at least quarterly reports from an auditor or other trusted third party.

• Regulatory risk: Many operate without regulatory oversight. Stick with lenders regulated or approved in your country.

APX Lending reduces these risks by working with BitGo for insured custody and by meeting multiple regulatory and security standards. We are approved with CSA in Canada, and registered with FINTRAC in Canada, and FinCEN in the US. In addition, APX Lending is compliant with SOC 2 Type 1 for information security.
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Bitcoin loan vs. Traditional loan

Here Bitcoin loans compare to traditional loans:

Final thoughts

Bitcoin loans are a powerful way to access cash without selling your crypto. They are fast, secure, and flexible when you work with a regulated lender. If you are considering borrowing against your Bitcoin, focus on providers with transparent terms, insured cold storage custody, and clear regulatory oversight.

APX Lending is the only CSA-approved crypto lender in Canada and the U.S. With insured custody, no rehypothecation, and funds available within 24 hours, we help you borrow against your crypto with confidence.

Frequently asked questions about Bitcoin loans