If you have been considering a different way to earn on the crypto you HODL, then lending is the ideal way for you. Cryptocurrency lending allows you to invest your assets in a setting that is very much similar to a conventional bank.
Have You Already Tried Crypto Lending?
If you invest your crypto by lending it out or are familiar with the ecosystem, there are some metrics to look out for. You have to ensure that the platform you use is safe and secure. You can measure security based on the regulatory atmosphere surrounding that platform and the storage it uses for your funds. This will help to protect your funds much later.
What Is a Crypto Lending Platform?
A cryptocurrency lending platform allows you to earn interest on your digital assets. It loans your funds to borrowers who repay with an interest rate. Rates can be between 8 to 12%, providing a much higher return than traditional banks. Lending platforms equally enable borrowers to invest in the crypto market while using their funds as collateral.
CeFi Versus DeFi Lending Platforms
When investing your crypto through lending, you have to consider the variety of platforms. Centralized finance (CeFi) platforms are controlled by a designated entity while decentralized ones operate autonomously.
One of the major benefits of centralized finance is that users can make easy fiat-to-crypto conversions. Because this kind of transactions require the involvement of an identifiable authority, centralized finance platforms are your best bet.
Also, there is the availability of customer support. CeFi platforms are essentially companies that fulfill services on behalf of their customers. Thus, if the ability to talk to a professional about any issues is important to you, then CeFi is a great place to get that.
In addition, CeFi platforms offer more accountability regarding your funds. They are regulated, provide insurance cover, and will often have been active for a longer period. You can therefore assume that your funds receive better protection under centralized finance.
However, on the flip side, CeFi platforms may offer lower interest rates. Due to the high fees they pay to middlemen, the reflection on the customer end is in form of lower returns. You also need to transfer control of your account to the platform, making it undesirable for privacy enthusiasts.
When using DeFi, a prominent quality is the execution of tasks through independent tools known as DApps. In the absence of a central authority, these resources help to complete payments and other transactions. DeFi platforms increase financial inclusion by dismissing the need for credit checks and KYC protocols.
Also, since DeFi platforms circumvent the need for middlemen with their innovative infrastructure, transaction costs are lesser. This means that you earn interest up to 12% on your assets.
However, a disadvantage of DeFi is the plethora of tools users have to understand. These can be confusing and may create problems if you are new to the platform. Also, you confront the risk of losing your funds if the DeFi security architecture is breached.
CeFi VS DeFi
Take a look at pros and cons of each type in short comparison tables:
|Accountability for customers’ funds||Lower interest rates|
|The presence of customer support||Controls private keys to individual accounts|
|Flexibility across independent blockchains|
|Trustless, permissionless. Allows users full control of their accounts||Complex, especially for beginners|
|Removes barriers to financial inclusion||Little or no regulatory oversight|
|Innovative products can counter some of its shortfalls||Absence of customer service|
9 Best Crypto Lending Platforms 2022
CoinRabbit is a crypto lending platform that came on board in 2020. It intends to increase access to funds for investors and borrowers and is throttling to become a major leaguer. Currently, the following are the platform’s specifics:
- As a borrower, you pay 14% APR on your loans. There is no particular time you are expected to pay so long as you make periodic interest payments.
- Lenders earn 10% APY on their investment.
- The platform offers customer support through the ‘chat’ feature on its website.
- The minimum deposit on CoinRabbit is $100.
- The Loan-to-Value (LTV) is flexible and the basic is 50%. You can adjust it by adding more to the collateral amount to avoid the liquidation.
- There are no credit checks or KYC processes. You only need your phone number or email.
- There are no time frames for your loans. Repay them partially or in full any convenient for you time.
- Also, you can access your loan within 10 minutes of initiating the transaction.
CoinLoan is a platform established in 2017. It is headquartered in Estonia and, asides from its regulation under the Estonian Financial Authority is licensed by five other agencies. The following are details about the platform:
- CoinLoan offers more 140 currency pairs for exchange. It also supports 15 projects for loans.
- The maximum APY on CoinLoan is 12.3%, 10% being the standard.
- Borrowers have a 30 days to 3 years loan term.
- You can execute transactions using SWIFT, SEPA, Advcash, Mastercard and Visa.
- The minimum deposit on CoinLoan is $100.
- The platform has a very high loan-to-value ratio with loans pegged at 70% of the collateral.
- Also, there is a KYC procedure which can be completed quickly.
Celsius is a platform that is specifically appealing to beginners. It provides intuitive resources which allow fresh investors to blend into the crypto space. In terms of lending, the app offers some exceptional benefits which are listed below:
- No minimum deposits
- No withdrawal or transaction charges
- No hidden fees
- The platform has four loyalty tiers, each one determining the amount of interest you can earn
- Its payment option work as seamlessly as major payment service providers’
- It offers up to thirty cryptocurrency pairs.
- 90% loan-to-value ratio
BlockFi is a US-based platform that can be configured for many purposes. Users can operate a BlockFi account for both business and personal reasons. Not only is the platform regulated, it takes extra measures to ensure the security of its investors’ funds. Here are some benefits:
- BlockFi invests your assets carefully with its LTV pegged at 50%
- Being located in the United States means that it has an extra layer of regulation than usual
- Also, BlockFi invests in securities which are regulated by US agencies. This embeds it deeper in regulatory pools.
- First withdrawals of the month on crypto and stablecoins are free
- Up to 8.6% interest rate
- 4.5 to 9.75% for borrowers, depending on the token
YouHodler was established in 2018, with headquarters in Cyprus and Switzerland. It is well regulated and offers an easy-to-use interface for beginners. Also, the platform is a go-to for investors seeking top cryptocurrencies and a high LTV. The following are some of its perks:
- 12% APY on stablecoins and 8% for altcoins.
- The platform is regulated by different agencies which suggests a high compliance and security level.
- Is available in more than 100 countries, creating a global community.
- YouHodler has a highly responsive customer service and has earned a high rating in this regard.
- There are up to thirty currency pairs, close to 20 among top cryptocurrencies.
Founded in 2019 by Juntao Zhu, a Singaporean, the Fintech company enables customers to earn on their crypto assets. It offers six trading pairs, including some of the top cryptocurrencies on the market. The following are perks of using Hodlnaut:
- Its whitelisting feature allows customers to limit withdrawals to certain addresses. This way, there is a lower risk of losing your funds.
- There is no minimum deposit or charges on deposits.
- You can earn $20 on your $1000 deposit.
- The platform has a KYC requirement in place.
- Up to 12.73% interests.
- Self-sponsored insurance available to protect your assets
- Hodlnaut uses a cold storage facility for reserves.
Aave is one of the most innovative platforms in the DeFi space today. Founded in 2017, it was initially modeled after the Ethereum blockchain. Aave is now a major competitor, spearheading creative additions to decentralized finance. Below are some of its features:
- Stable and diverse interest rates which allow users to switch based on their revenue goals.
- 17 liquidity pools for users to borrow from
- No KYC/AML requirements
- Features which advanced and new users can fluidly interact with
- Optimal security infrastructure
Compound Finance is another interesting platform in the DeFi world. It has a diverse suite of products that users can leverage to make good their goals.
- No KYC, AML, or credit checks
- $1.96 – $31.96 in APR
- Instant loan payments for crypto and stablecoins
- Loan maturity periods as long as 1 year
- Up to $100,000 loans
If there is one thing that distinguishes this project, it is the different approach it brings to crypto lending. Here, loans repay themselves rather than the other way round. We have compiled a few benefits of using Alchemix:
- 12% APY
- The platform does not store users’ funds for security reasons
- Self-paying loans
- Customers have to complete a KYC procedure
This article has discussed cryptocurrency lending and the most ideal platforms to approach. We have also focused on angles such as security, regulation, and interest rates. However, it is important to conduct further research on your preferred, to learn all there is to know as an investor.
Not financial advice. Do your own research and take everything moderately.
Crypto-backed loans have their own risks that should be taken respectively.