The disruption brought by the emergence of cryptocurrencies in the banking industry continues to shake up it with the emergence of altogether new systems. Securing loans for purchases such as cars has never been easier, thanks to Blockchain lending platforms that have recently shot up. Through Blockchain, these platforms offer crypto backed car loans with owned cryptocurrencies acting as collateral, allowing you to essentially buy a car with crypto.
They come with attractive packages suited for borrowers looking for quick and easy to process funds. To begin with, the lending platforms get rid of vigorous background checks carried out by traditional financial institutions before approving loans. Even better, the loans are processed instantly. This sounds great when a vintage car goes on auction and you need to settle the bill before the hammer falls.
Cryptocurrency investors who wish to hold their digital assets but still be able to move around the value of their assets are finally able to do so. Today, there are lending Blockchain platforms that use cryptocurrencies as collateral for loans. The loans are issued at reasonably competitive interest rates of between 10 -15 % with borrowers required to make monthly interest payments. Lending platforms issue loans to fund huge investments or small purchases for day to day businesses. Getting loans is quite easy, with the only requirement being in possession of accepted cryptocurrency on a lending platform. The assets offered up as collateral are held in wallets provided by the platform for the period of loaning. Depending on the lending platform, users are granted credit ranging from a minimum of $1000 to $2,000,000 against their assets. Funds can be used to finance the purchasing of a vehicle or for car customization, such as tuning, car wrapping and window tinting.
Once applications are processed, funds are immediately credited into customers’ bank accounts in the preferred fiat currency. Interests attracted by the loans are paid monthly whereas the principal amount is paid at the end of the loan period. Customers are at liberty to make their repayments in either fiat or cryptocurrency. Depending on platforms, accruing interests can be offset using utility tokens that power them.
Unlike banks that may be confined to local jurisdiction, the cross-border nature of cryptocurrencies enables lending platforms to serve a much wider population. Their digital nature is important for the purpose of transfer and verification. Traditionally, if someone in the USA for instance, wanted to secure a loan through a Bank in Europe, they would have to have their physical asset verified. This would be highly cumbersome if not impossible – if at all jurisdiction regulations would allow. Crypto lending is also important for a number of young people who do not own tangible assets but do cryptocurrencies. The majority of retail investors in cryptocurrency fall within the ‘youth ‘classification. Financing assets such as cars for these groups is not always easy, it then is only fair that they are able to use their digital assets to do so.
Although collateral assets are held to secure monies given by the sender and thus more or less ‘belong’ to the lender, any appreciation in value during the loaning period belongs to the owner. Once the loan has been serviced, the assets are relinquished to the loaned person in full together with any further profits made.
There are a number of top notable lending platforms spread across Europe and USA. Most of them accept the top cryptos; Bitcoin and Ethereum, as collateral. As it is an understandably new route taken, most of the platforms are on the growth path and promise to include more accepted coins as they go. The American based Secure Automated Lending Technology (SALT) platform was the first to introduce the idea of crypto backed loans. ETHLedger operates in a similar manner as SALT and accepts Ethereum and other ERC-20 compliant tokens as collateral. So does Nexo, RAD Lending and BlockFi. Nexo had a background in lending through a publicly listed company, Credissimo, before joining crypto lending. This sets it apart from other platforms that started out as startups. Nexo offers its users Nexo Credit Card which makes the platform quite unique. Following hot on the crypto lending heels is the new entrant BlockFi. The platform was established through funding by Institutional investors and therefore does not have a utility token. As of this writing, BlockFi operates in 44 US states with California being the latest state to license it. This makes it the largest Crypto – USD lender in the USA.
As more of such lending platforms are created, the market becomes more competitive and borrowers get to enjoy access to lower interest rates and a vast pool of creditors. This no doubt will change the lending landscape such that traditional lenders will have to make adaptations and integration or risk being phased out.