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A bitcoin loan is a loan of cash, assets, or products secured by bitcoins. This is the ultimate trick for utilizing Bitcoin without having to worry about FOMO or paying taxes when you sell it.
Even though some people might not understand what a "Bitcoin loan" is, it doesn't always indicate that the loan is made with Bitcoin. A loan is only classified as a Bitcoin loan if the security supporting it is worth bitcoins.
The goal of all loans, including those backed by Bitcoin, is to increase the value of something that is currently unavailable or unstable on the open market. Conventional lenders accomplish this by offering cash or a credit line in exchange for the value of your upcoming projects or work.
Does Unchained Make Loans?
Unchained Capital is a financial services provider that lends money to Bitcoin owners. Many people find this help beneficial when handling large amounts of money. In contrast to traditional banks, it offers clients the option of keeping their Bitcoin as security for loans.
It provides a special kind of security called Collaborative custody multi-signature vaults. Using the Bitcoin held requires the signatures of many parties, including Unchained Capital, the user, and an independent custodian. Unchained Capital only serves customers in the USA.
Important Factors
Unchained provides amazing customer support. They respond to requests about Bitcoin and help set up the vaults. Additionally, users have access to financial services such as loans secured by Bitcoin. The Bitcoin in your safe can serve as security for these loans.
- Interest rate: 6% for a one-month loan, 15.65% for a six-month loan, and 15.65% for a twelve-month loan
- Origination fees: 1 month’s worth at 14.00%, 6 months' worth at 14.00%, and 12 months' worth at 15.00%.
- $10,000 is the minimum loan amount.
- No fines for early payments.
- $10 is the late payment cost for every case.
- Unchained Trading, LLC will charge a collateral selling fee (see trading desk fees).
- 2% of the sale price is the forced liquidation fee.
How Does it work?
When borrowers obtain a Bitcoin loan, the amount they borrow in real money is secured by the bitcoins they have paid. The maximum amount of USD that a borrower may borrow is determined by the loan-
to-value ratio. It also establishes the price at which the assets submitted could be sold to pay back the loan.
To prevent an approaching liquidation, customers are encouraged to add extra collateral. For example, a consumer who transfers $1,000 worth of Bitcoin and has a 50% LTV is eligible to borrow $500 in fiat USD or stablecoins or up to 50% of the invested amount.
Suppose the user's Bitcoin collateral decreases value by 80% of the borrowed amount. In that case, they run the danger of losing their Bitcoin security if the Bitcoin loan platform has 80% LTV criteria for liquidation.
How does it save money?
A loan backed by Bitcoin allows for the availability of a portion of an investment without the need to sell Bitcoin. By keeping any possible gain and preventing a taxable event, the borrower can benefit financially from this loan and even turn a profit on their first investment.
The borrower uses it to purchase a home, a used car, or even additional bitcoin. If so, they can repay the loan with the proceeds from their investments without liquidating any security. There is always some risk associated with this method, known as a leveraged investment.
For instance, the borrower may lose their initial investment if the price of bitcoin declines throughout the loan term, and they are unable to provide the necessary security. When borrowers use their funds to purchase more Bitcoin, they increase this risk.
However, an investor can repay the loan without having to sell their collateral or pay interest if their second investment is profitable and the value of bitcoin rises.
Pros and Cons of Unchained
Pros:
- Not utilizing tokenomics
- User deposits are not rehypothecated.
- Clear costs and a payback timeframe
- Proof of reserves on-chain is ideal for lenders that require a lot of cash from institutions.
- Real-time customer service staff
Cons:
- Manual procedure for approval
- Excessive interest rate for USD loans
How to Get a Bitcoin Loan Without Collateral?
While a particular quantity of cryptocurrency assets is usually required for crypto loans, it is also possible to lend bitcoin without any assets at all. By choosing this option, the borrower can receive funding from the lender without harming his assets.
How to Get:
Goldfinch is one of the community's biggest lenders, credited with inventing uncollateralized cryptocurrency loans. It's a crypto organization that takes donations from supporters. Conversely, liquidity providers contribute a portion of their assets to the liquidity holdings within the system.
In the meanwhile, borrowers are in charge of reviewing the applications submitted by borrowers who frequently use off-chain collateral loans. Additionally, this theoretically enables anyone to test out a crypto loan, even if they have minimal or no digital assets.
Furthermore, Atlantis is another emerging site that offers cryptocurrency loans devoid of collateral requirements. The site's quick process and safety standards make transactions enjoyable for the borrowers.
Conclusion:
With the possibility for profit, bitcoin loans present an appealing way for investors to grow their holdings of BTC, buy additional assets, or meet cash flow requirements. However, many people may take excessive risks with these financial products because to the permabull mindset, bitcoin's price will only ever rise.
Unchained is a reliable business with excellent client service. It provides an attractive option for those who wish to keep their Bitcoin in safe, cold storage but do not want to do this personally. Another appealing feature is the availability of various financial services.
