Currently, Cryptocurrency investors have found another use for digital currencies, Crypto lending. Cryptocurrency is gaining popularity as a lending alternative to financial institutions and banks.
Today, there are scores of Crypto lending platforms with tens of thousands of users who take digital currency loans to fund a project or another. Why is there an increasing demand for Crypto lending? Before we go into that, let’s find out what Crypto lending is.
What is Crypto Lending?
If you already know about lending, you have an idea of what Crypto lending. The same concept used in traditional lending by banks and other financial institutions applies in lending digital currencies, too.
Crypto lending refers to borrowing a digital currency from an exchange, hoping to repay the loan with the accumulated interest. In traditional lending, you present your asset as collateral but when borrowing digital currencies, you are required to present your underlying digital coins as collateral. Cryptocurrencies are acceptable collateral when taking a digital currency loan.
This concept is otherwise known as “Bitcoin loan,” a reflection of the popularity of the first digital currency and as the primary currency that most crypto lenders accept as collateral for cryptocurrency loans. However, cryptocurrency lenders don’t limit their operations to Bitcoin only; they extend it to other cryptocurrencies as well.
Factors behind the Popularity of Crypto Lending
Both Crypto critics and enthusiasts are taken aback by the astronomical increase in the degree at which people seek financial assistance through digital currency. Within the last 18 months, its popularity has kept increasing like harmattan wildfire as more people resort to taking Crypto loan for one reason or the other.
Why is Crypto lending moving at such super-fast speed? Consider some of the factors behind the huge and growing demand for this financial service:
A Better Alternative to Traditional Lending
The cryptocurrency was introduced as an alternative to traditional money. The need for a reliable means of payment devoid of the bottlenecks of using fiat money led to the development of a better alternative. The same holds in Crypto lending.
The quest for a better alternative to traditional lending gave birth to loan offers with digital currencies.
It is also noteworthy that the increase in crypto assets across the world triggered the need for new financial services. Thus, people need digital currencies for a wide range of services, crypto-based lending and financing inclusive. Thus, crypto holders can easily generate funds through digital currencies.
No Credit Score
Have you ever applied for a bank loan? If you have, you were probably asked to present your credit score, a major requirement in determining your eligibility for the loan.
A poor credit score automatically nullifies your eligibility while you have a good chance at getting a loan with a healthy credit score. Many potential borrowers have had their dreams dashed due to their failure to present a flawless credit rating.
Your credit score doesn’t come up when applying for a Crypto loan. It’s not an eligibility determinant. Your eligibility depends on your ability to meet the basic lending requirements as set by the lending platform. This is a great relief for individuals whose credit history may not qualify them for a traditional loan.
Also, you can see the huge benefit of credit score waiver offered by crypto lenders as seen in the image below:
You are spared the embarrassment of disqualification if your credit score is not convincing enough to secure a bank loan by taking advantage of this new finance option.
Established Business is not a Requirement
Banks and other financial institutions always play it safe. One of the requirements for loan eligibility is the existence of a thriving business, an assurance that a potential borrower won’t default on payment.
While this is a great move by such institutions, it is discouraging for several startups with brilliant ideas but who don’t have the financial powers to execute their ideas. Such individuals will find solace in Crypto lending. They can convert the borrowed digital currencies into fiat money for project execution.
No Lengthy Paperwork
Easy access to a loan is guaranteed when taking a Cryptocurrency loan, thanks to the absence of lengthy paperwork that is the hallmark of traditional lending. When applying for a loan on a conventional platform, you must be ready to go through the strenuous paperwork before your application is considered.
However, most Crypto lending platforms will credit your account with the loan amount in a couple of hours after submitting your application, once you meet the basic criteria for the loan.
The opportunity to have access to funds when needed also makes Crypto lending a popular funding option. Sometimes, some borrowers need loans to handle urgent needs or time-limited financial problems or investment opportunities. Going through the lengthy bank application process may make them miss out on those opportunities. You don’t entertain such fears if you wish to leverage your digital currency to take a loan. Get the loan within hours and attend to your needs.
Transparent Loan Process
Transparency is another important reason why many people are turning to Crypto lending. The entire process, from signing up on the lending platform to the loan approval, is recorded on Blockchain. The legendary technology ensures that the process is as transparent as crystal. Thus, you can have unrestricted access to your loan and other information at your convenience.
The transparency eliminates possible oversight that may trigger trust issues between a lender and a borrower.
Security is also guaranteed when taking a digital currency loan. Smart contracts hold the entire transactions once it is recorded on it. The Smart contract will go into automatic execution once you meet the pre-set conditions for loan approval.
That’s an assurance that your collateral is safe with the lender. You run zero risks of losing it, a possibility with fraudulent financial institutions.
Access to a tax-free loan is another huge factor in favour of Crypto lending. As a borrower, you can avoid paying taxes on your digital currency by taking a loan backed by your digital assets. IRS considers such loan as income and makes it tax-free.
Investors are leveraging the opportunity offered by Cryptocurrency lenders to use borrowed digital currencies to move their businesses to the next level. They are investing in stocks and other digital currencies with the potential for growth with other coins borrowed from lending platforms.
If you are considering this fund-raising option to boost your business or invest in Cryptocurrency, you can choose from the available options. However, Nuo Network is a top-ranking decentralized exchange that offers Crypto lending services. It is simply the best among the best.
The decentralized exchange promises “the non-custodial way to lend, borrow, or margin trade crypto assets.”
On this exchange, you can borrow a wide range of digital currencies such as:
- Ethereum (ETH)
- DAI Cryptocurrency (DAI)
- Maker Coin (MKR)
- Wrapped Bitcoin (WBTC)
- USD Coin (USDC)
- TrueUSD (TUSD)
- Augur (REP)
- Chainlink (LINK)
- Kyber (KNC)
- OX (ZRX)
- Basic Attention (BAT)
Nuo doesn’t limit you to a single coin. Potential borrowers have these options to choose from, offering them borrowing convenience in the digital currency of their choice.
How does it Work?
Taking a Cryptocurrency loan is not difficult. The lending opportunity is exclusively reserved for Nuo’s registered members only.
Thus, to be eligible for the loan, create a Nuo Smart account on the exchange using the Sign Up menu. You will create a password during the registration exercise that will always give you access to the exchange and its plethora of services.
After the registration, move to the next stage: add your collateral. Just as traditional lending requires collateral, Crypto lending does, too. Your collateral can be an ERC20 or ETH token.
You can then create an over-collateralized loan. Nuo will match your loan amount to an ERC20 or ETH reserve and credit your Nuo Smart with the fund without delay.
Once your account is credited, you can transfer the fund into an exchange or a wallet to give you access to the fund whenever you need it.
The exchange offers customizable loans. Borrowers can borrow short-term and long-term roles and determine their loan tenure and interest rate as well. You have absolute control over the loan.
Crypto users can now have access to capital for a wide range of uses. They can solve several problems with the borrowed funds. You can pay off your debt, settle a mortgage, buy a home, or as you please without financial constraint. What is more, you won’t lose your digital assets.
Thus, rather than being stuck with conventional lenders, Crypto users and investors can avoid credit agencies and banks and take a risk with Cryptocurrency lenders for instant funds. The beauty is that you don’t even need a bank account to get a Crypto-backed loan. You only need a wallet to deposit funds whenever you need it.
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