How to get a loan in bitcoin

Should you risk borrowing in this volatile currency for low rates and no credit requirements?

Should you risk borrowing in this volatile currency for low rates and no credit requirements?

As for all that surrounds bitcoin, getting a loan with this cryptocurrency is different from financing a loan in US dollars. Interest rates are often lower, your credit score does not matter, and funding comes from individuals and not institutions. But it is also much riskier and investors are often attracted to new businesses – people looking to invest in another cryptocurrency but do not have the money or those who need funds to start a transaction. cryptocurrency extraction.

In other words, it’s usually not for noobs.

Warning: This information should not be construed as an endorsement of cryptocurrency or any other
provider, service or offer. This is not a recommendation to trade.

Our first choice: BlockFi loans Cryptocurrency

  • Min. Loan amount: € 2,000
  • Max. Amount of the loan: 100,000,000 €
  • APR:
    4.5% (from)
  • Requirements: To have 4000 € + in cryptocurrency. Not available in NV, SD, VT or HI.
  • Flexible refunds
  • Large loan
  • No tax on cryptocurrency
  • All types of credits are welcome
  • No income required

Our first choice: BlockFi loans Cryptocurrency

Access the value of your cryptographic assets without cashing them.

  • Min. Loan amount: € 2,000
  • Max. Amount of the loan: 100,000,000 €
  • APR: 4.5% (from)
  • Requirements: To have 4000 € + in cryptocurrency. Not available in NV, SD, VT or HI.

What do you want to read first?

What do you want to read first?

The most common place to get a bitcoin loan is an online service that matches lenders and borrowers. Here are two of the leading providers of Bitcoin loan platforms.

Beware of lenders on Bitcoin forums

Beware of lenders on Bitcoin forums

You can get a bitcoin loan without going through a platform by visiting online forums and contacting individual dealers directly. You may not have to pay a platform fee, but these risks are much higher for both the borrower and the lender.

Indeed, it is even more difficult to verify the identity of a person on a forum. And if something goes wrong, you might not have legal recourse to get your money back.

It is better to leave the forums to experienced Bitcoin users who have a clear idea of ​​how to detect a scam.

First, here is how bitcoin works

To understand how bitcoin loans work, you need to understand what bitcoin is. Bitcoin is basically a cryptocurrency that works entirely online. It is decentralized, that is, no organization, no individual, no particular country controls it. This allows bitcoin users to make direct transactions with each other without the involvement of a third party – such as a bank.

The transactions are recorded and published on an electronic book called blockchain, accessible to all. The blockchain relies on several anonymous computers – called minors – to verify the legitimacy of transactions before joining the blockchain to prevent fraud. Rather than the existing blockchain on a server, making it vulnerable to hackers, it is distributed to all bitcoin users.

Confused? Read our beginner’s guide on Bitcoin

How does the bitcoin loan work?

At the basic level, Bitcoin loans work like your standard term loan: it is the borrowed money you repay, plus interest and fees over a predetermined period of time. You repay it in fixed installments according to your loan agreement. You can also obtain bitcoin credit lines and short-term bitcoin loans.

This is where most of the similarities end. Since Bitcoin is not affiliated with any central government or banking institution, your typical Bitcoin loan comes from other Bitcoin users. You will also need to take into account any commission on the current exchange rate in your fees.

Peer-to-peer platforms

The easiest way to get a bitcoin loan is to use a peer-to-peer platform that connects investors with borrowers, usually for a fee. To borrow via a Bitcoin loan platform, you must first set up an account and wait for verification.

Trust score

Bitcoin lenders do not rely on the usual methods to judge your creditworthiness, such as your credit score or debt ratio. Instead, the platforms give you a confidence score, sometimes called a credit score or rating, based on their ability to verify your identity and financial history. To obtain a high confidence score, you may need to submit detailed documentation.

Funding

Once your account is verified, you usually need to select your loan type and submit your application form. You can receive loan offers in just a few hours and get your funds instantly once you have agreed.

What documents will I need?

What documents will I need?

Because you will not go through a traditional lender, some of the documents you will need to provide to get a loan in bitcoins will be different from those of a standard loan.

  • Identification document issued by the government. A scan of your passport is preferable because many of these sites are international.
  • Checking your address. Utility bills on your behalf are ideal.
  • Verification of your email. Typically, the platform sends a link or code to your email address.
  • Credit card verification. Bonus points if you can prove that you have always paid your credit card bills on time.
  • Connect to your social media. The more you are, the better it will be to prove that you are a real and active person.
  • Login to online payment accounts. The platforms use the history of your transactions on online accounts such as PayPal or eBay to verify that you pay for things on time without red flags in your past business transactions.
  • Income verification. Recent payslips, invoices or tax forms prove your ability to repay a bitcoin loan.

What are the eligibility criteria?

Getting a loan in bitcoins could be less complicated than going to a bank. But you still face basic eligibility criteria. To join a Bitcoin platform and find investors willing to lend at a competitive rate, you usually need to:

  • Living in a country where bitcoin is regulated, like the United States
  • To have a stable job
  • Have a high confidence score

How are bitcoin loans different from other personal loans?

How are bitcoin loans different from other personal loans?

Although bitcoin loan platforms sound similar to other peer-to-peer online lenders, such as LendingClub or Prosper, you will find the main differences:

Firstly, Bitcoin platforms determine your creditworthiness by using criteria different from those of peer-to-peer platforms that make loans in euros. Bitcoin platforms tend to focus on your online presence and often do not care about your credit history or what you owe elsewhere.

On the other hand, peer-to-peer platforms do not care who you are, but put a lot of weight on your credit score and other aspects of your financial history.

In addition, bitcoin loans are less regulated than loans in euros. There is virtually no underwriting compared to peer lenders. In addition, lenders sometimes have no recourse to be compensated if the borrower lives in another country and is defaulted. And Bitcoin loans tend to default at a much higher rate, making them riskier from the investment point of view.

  • Absence of regulation. Bitcoin is regulated in many countries, but not in as many countries as other types of government-guaranteed currencies. It is likely that you take out loans from several countries, making it difficult for your lender to take responsibility in the event of a problem.
  • Volatile currency. The value of Bitcoin fluctuates considerably during the day. If you take out a bitcoin loan and convert it to another currency, you may have to pay several times the amount you borrowed because of the change in exchange rates.
  • High default rate. Whether due to fewer consequences or the difficulty of repaying them, these loans have much higher default rates than your standard bank loan.
  • Most platforms are not based in the United States. The little regulation in place differs from one country to another and it can be difficult to get in touch if you have difficulties with your account.

Invest in Bitcoin Loans

Investment in Bitcoins is a high risk and potentially profitable game. It’s easy to start if you already have a peer-to-peer account.

Once connected, you can search for funds for borrowers and choose the amount you want to invest. Platforms usually charge a fee on your returns – usually between 1% and 10%, though they may go higher.

The high default rate, the relative lack of recourse in the event of default by the borrower and the constant value of the currency all represent significant risks for an investor. Remember to buy insurance on your investments to try to reduce these risks and make sure you take into account the recipients of the loans.

Given its relative lack of regulation, bitcoin is not always as stable as the good old American euro. If you prefer to get a more traditional loan with similar features and requirements, you may want to try:

  • Loans secured by bitcoin assets. Some lenders offer personal loans in USD guaranteed by the value of your bitcoin or your ether. These loans come with very competitive rates and are often easy to qualify. But you might be about to ask for a full refund if the value of Bitcoin takes a serious plunge.
  • Loans between individuals. P2P euro loans have some of the advantages of bitcoin loans – a similar structure, relatively low interest rates – without the risks associated with managing a crypto-currency that is difficult to regulate.
  • Online Brokers. Finding a personal loan to which you are entitled and that meets your needs may take some time. Online loan markets work to match you to an appropriate lender to which you will likely be entitled.
  • Bad credit, personal loans. Many bad credit lenders look beyond your credit score to other parts of your financial history when you sign up for your loan, just like Bitcoin lenders.

Bitcoin loans are new and not well regulated. But they could be another viable form of financing for those who do not meet standard credit requirements. Interest rates are often lower and financing can be almost instantaneous. Nevertheless, even if you do not have stellar credit, understand how crypto-currencies work. As the blockchain gets longer, the extra energy needed to build a block could lead to more expensive loans.

Before you start borrowing in bitcoins, discover other cryptocurrency loan options before deciding which one best fits your needs. You can also consider other personal loan options for traditional financing.

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