All You Need to Know About Free Bitcoin Loans
Free Bitcoin Loans
It seems Satoshi Nakamoto designed Bitcoin to never go out of the cryptocurrency markets and the financial discussions. When people believe that they have learned everything about this virtual currency, it throws back something new. And this time, it is becoming a hot topic for giving investors the privilege of Bitcoin loans.
Many of us are aware of Bitcoin’s investment potential, but we rarely would have thought that it could be used as a loan instrument. Making money with Bitcoins without selling them sounds like an exciting venture. For that reason, there has been a surge in crypto-backed loans at different cryptocurrency lending platforms. Not to mention that the volatile nature and recent upticks in the Bitcoin prices have made people rush to it to take advantage of the situation.
Bitcoin (BTC) is powered by decentralized blockchain technology. And it is the same technology behind decentralized finance (DeFi) that makes loans feasible. With features like transparency, privacy, reliability, security, and no intermediaries, decentralized finance provides a peer-to-peer (P2P) asset management system to both the lender and the borrower. Today, many P2P cryptocurrency lending platforms offer crypto-backed loans.
So far, so good, but knowing this will do nothing good unless you know what Bitcoin loans are, how and where to borrow them, and which factors to consider for crypto-backed loans options. That is why we have come up with this article that answers all your burning questions.
What are Bitcoin Loans?
In simpler words, a loan offered or borrowed against the Bitcoin collateral at a fixed interest rate in exchange for Bitcoin cash is known as a Bitcoin loan. To be more precise, the debtor connects with the lender at a cryptocurrency lending platform and offers crypto assets as collateral. While the debtors agree to pay back the debt in a predefined time, the lenders give the Bitcoin cash and earn interest on the amount of money lent till the Bitcoin loan is repaid.
Bitcoin loans have three main components, including the individual or institutional investor that lends the funds, a cryptocurrency lending platform that mediates the Bitcoin loan process, and the entity or individual that seeks the loans. As the whole process takes place through the P2P model, the debtor is saved from incurring additional costs, time, and security concerns.
The conditions for crypto-backed loans and loan type might vary, depending on the identity verification process requirements and collaterals. The Bitcoin-backed loan platforms that facilitate loans can be categorized into centralized and decentralized. Centralized bitcoin loan platforms require a standard KYC verification process, provide custody solutions, and manage payments. Besides, they allow transactions in Bitcoin cash in exchange for Bitcoins. Decentralized Bitcoin lending marketplaces do away with KYC information or credit checks and require a Bitcoin wallet instead. Also, the transactions on these Bitcoin-backed loan platforms are available in Bitcoins only.
Typically, crypto loans are offered as collateral in the form of digital assets like Bitcoins. However, a few cryptocurrency lending marketplaces permit borrowers to collateralize their loans with physical assets like real estate and automobiles. With collateral-based Bitcoin lending, bitcoin loan platforms no longer need to evaluate the borrowers’ creditworthiness, and borrowers get the freedom of loan using the money the way they want.
Both the lender and debtor benefit from loans. By offering loans, lenders generate a regular income from the interests paid by the borrower. On the other hand, the borrower gets the urgently needed money while keeping their Bitcoin holdings intact.
One thing that borrowers must take into account when requesting loans is the loan to value (LTV) ratio. The LTV ratio, in financial services terms, is the worth of the collateral that is offered against a loan, which in every possible scenario should be more than the loan amount.
Many cryptocurrency lending platforms enforce a loan to value ratio at 50 percent, which means the debtor needs to collateralize a digital asset twice in value to the loan amount requested. A higher loan to value ratio will reflect higher interests, causing the loan to become more expensive.
How to get a Bitcoin Loan?
To get started, getting a Bitcoin loan is relatively simple and can be completed in a few simple steps. However, the borrower needs to keep some things in mind before accessing a cryptocurrency lending platform. First, they should make sure that the market price of Bitcoin (BTC) is low at the time of loan processing, and second, they must select a trustworthy and secured automated lending technology. The rest of the Bitcoin loan process is as follows:
- Register with a cryptocurrency lending platform using an email address.
- The debtor verifies their Bitcoin (BTC) collateral and trust score.
- The debtor determines the fiat currency amount to borrow.
- The debtor can choose a loan with higher interests if they do not want to offer more cryptocurrencies as collateral.
- The lender decides the loan amount and the interests.
- The debtor submits the loan requests with KYC/AML documents if required.
- The lender reviews the Bitcoin loan requests.
- The lender confirms the loan approval.
- The lender provides the debtor with the loan terms.
- The debtor accepts those loan terms.
- The borrower deposits the Bitcoin (BTC) collateral in the lender’s brokerage account.
- The lender transfers the loan in the agreed-upon fiat currency in the borrower’s bank account.
- The borrower receives the money.
Bitcoin Loans – Pros & Cons
| PROS | CONS |
| Processed via peer-to-peer lending. | Peer-to-peer lending without verifying the borrower’s credit scores could be risky. |
| Approved quickly and processed within a few hours to seven days. | Online Bitcoin (BTC) marketplaces are extremely volatile that can result in the loss of funds quickly. |
| Does not require credit checks or credit scores. | The lack of Bitcoin (BTC) regulation can increase the inherent borrowing risk. |
| Can be outsourced to investors anywhere in the world. | Many cryptocurrency lending platforms are scams. |
| Offers lower interest rates (1%-5%) than the traditional bank loan. | Lenders are strangers that can create trust issues. |
| Requires Bitcoin (BTC) collateral mostly. | Margin calls can disturb the loan adjustment and correction. |
| Borrowers get instant crypto cash for their cryptocurrencies, and lenders earn extra income from the loan. | Lack of handholding and no customer support at decentralized cryptocurrency lending platforms. |
Best Bitcoin Loans Provider
| BITCOIN LOAN PROVIDERS | FEATURES |
| CoinLoan | Up to 10.3 percent annual return on investment (ROI), immediate liquidity, no deposit or withdrawal fees, loan term from seven days-three years, a minimum deposit of approximately $100, regulated by the Estonia government. |
| SALT Lending | No minimum investments, minimum cash loan amount $5,000, predefined loan terms, 5.95 percent to 15 percent annual compound interest rates, long term loan term from three-twelve months, LTV from 30 percent to 70 percent, 5 percent liquidation fee, $0 origination fee/loan repayment fee. |
| Nexo | Powered by European fintech Credissimo, 256-bit encryption security, no fee, fixed interest rate, minimum loan amount $500, annual interest rates 5 percent to 10 percent, LTV up to 80 percent, $0 origination fee/loan repayment fee. |
| BlockFi | BlockFi offers long term loan terms for twelve months, up to 9 percent annual interest rate, leverage Bitcoin cash, LTV from 20 percent to 50 percent, 1 percent to 2 percent origination fee/repayment fee. |
| YouHodler | LTV up to 90 percent, Bitcoin cash loans against Bitcoin (BTC) collateral, minimum loan amount $100, $150 million worth crime insurance pool, investment term from 30 to 180 days, member of the Blockchain Association, annual interest rate up to 12 percent. |
Free Bitcoin & Crypto Loans Provider
| FREE BITCOIN & CRYPTO LOAN PROVIDERS | FEATURES |
| Celsius Network | No minimum deposit, no lock-up, no penalties, no withdrawal fees. |
| dYdX | No minimum loan amount, $0 origination fee/repayment fee. |
| Hodlnaut | No minimum deposit, no lock-in period. |
Conclusion
Bitcoin loans have become the trend for many reasons, including instant and secure processing with no loan limit on its usage. Also, they are less complicated when compared to traditional small business loans.
The only things that might bother some borrowers are the costs and risks associated with loans. You should carefully analyze the loan terms, LTV ratio, interest rates, and payback duration while borrowing a loan. So, if you are thinking of getting a Bitcoin loan, we hope this article will help you make an informed decision.
Frequently Asked Questions
1. How can I get 1 Bitcoin for free?
Buying Bitcoins for free is possible by participating in various online activities. Among different ways to earn 1 Bitcoin (BTC) include:
- Shopping with cash-back websites like Bitrefill or Lolli.
- Playing mobile or online games.
- Performing tasks.
- Taking surveys on various Bitcoin rewards websites like Cointiply, Bitcoin mining, Bitcoin lending, and Bitcoin trading.
2. How do I get a Bitcoin Loan?
One must sign up with a reliable cryptocurrency P2P lending platform as a way to get a loan. The cryptocurrency lending marketplaces give lenders and borrowers a common platform to meet their individual needs. The debtor collects the cash loans instantly from the crypto lender by collateralizing Bitcoin on a fixed interest rate.
3. Is the Free Bitcoin app legit?
The Free Bitcoin app is a legit Bitcoin faucet to earn Bitcoins for free. It has millions of users who get a chance to win Bitcoins in crypto rewards for playing different games, completing micro-tasks, or using the referral program. The mobile app provides two-factor authentication to secure the user account and client funds.
4. Can I get a loan to buy Bitcoin?
Bitcoin is a highly volatile virtual asset, and its value can go either way in a fraction of a second. Therefore, taking a cash loan to buy Bitcoin (BTC) can be risky, even if one thinks the crypto value is at its peak. With that said, many peer-to-peer crypto lending platforms facilitate loans that can be used to buy Bitcoins.