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Using Crypto as Collateral a Realistic Need
Previously, lending was only possible through our traditional banking system and other financial institutions. Nevertheless, the trend as changed as blockchain technology and cryptocurrency is becoming more popular to people. This new trend is on a constant rise as today you can hold cryptocurrency assets while using them as collateral to get a flat loan. If you have understood the amount benefited by banks and financial institutions in providing loans, you will appreciate the importance of this new service.
Today, getting a crypto backed loan by using Ethereum (ETH) and Bitcoin (BTC) as a collateral is now a common practice in the crypto community. Right from history, various forms of financial market tools were used as collateral in obtaining credit facilities. Among those tools is the use of stocks. Interestingly, stocks have been mostly used as a means of collateral in taking a loan because it represents a good exchange value, does not depreciate quickly and liquid in nature. Because of this, the stock is widely used as the best collateral option among others.
Is Crypto-Assets Great collateral option for acquiring loans?
If you have gone through the loan process of a bank, you would attest you wouldn’t want to undergo such process again. The most problematic situations faced by loan seekers is coming up with acceptable collateral for the issuance of your loan. Besides this, another issue is that of timing because some loan seekers may want an immediate loan but because of the bureaucratic process of acquiring a loan, it may take longer than expected.
However, recently, the use of cryptocurrency has replaced our traditional means of acquiring a loan. Cryptocurrencies such as Altcoins, Bitcoin etc., have become the new block used as collateral in obtaining loans. Crypto assets are created to be liquid, seamless, and universally accepted.
The acceptance of using digital asset-backed loans has eradicated the issue of monetizing ones’ collateral. Furthermore, crypto backed loans are perfected without any delay – they are swift when compared to other means of acquiring loans like our traditional lending institutions.
Is Bitcoin the Perfect Collateral option for Loans?
There has been a lot of fussed about Bitcoin being used as a collateral for loan. The idea was birthed by some startup lenders with the aim of lending cash to members of the cryptocurrency community. These startups offer crypto backed loans for members of the community. Today, we have few startups that offer loan backed by cryptocurrency and among these is InLock.
InLock is a crypto backed lending platform that enables users to hold cryptocurrency in order to manage short-term liquidity by seeing loan or using existing cryptocurrencies as a security. Remarkably, the platform offers a risk-free loan opportunity for its crypto holders. The credit transaction system is designed in such a way that it involves only the borrower and lender. Nevertheless, during the loan process, InLock acts as an intermediary in recording the terms of the agreement. In addition, the InLock platforms solve the issue of “spendability” for cryptocurrency holders while serving as a doorway to the thriving cryptocurrency market for institutional investors.
Finally, the most interesting benefit of using crypto backed loan platforms is the credibility, security, and transparency it brings to the table. Most platforms offer awesome benefits for both borrowers and lenders. For lenders, it serves as an additional security against loan defaulters while for borrowers; it is a process to acquire a swift and stress-free loan.
Other Lending Platforms
Inlock is not the only site that gives investors the opportunity to invest using their cryptos as collateral. Some other platforms also present such prospects. One of such platforms is Salt, which is only available to users in the USA. However, the downside of salt is that it is slow in matching lenders and borrowers.
Salt locks up crypto assets until the borrower sends a written request. While Salt charges membership and late penalty fees, Inlock does not.
ETHlend.io is also one of the recognized platforms. Unfortunately, it may take up to 2 weeks to match lenders and borrowers on the platform. The crypto assets are completely locked until the loans are repaid. The site also charges Loan funding fee, Oraclize fee, Gas fee, and Late Penalty fee.
