The crypto world is evolving very fast; call it supersonic speed! When Satoshi Nakamoto created the first blockchain, many are those who got confused because little was known about it. However, more people have embraced cryptos today and they are using them in many ways, from sending value to asset protection. Now, we have another product that is a really exciting those in the decentralized finance industry – crypto lending. So, how exactly does it work?
What is Crypto Lending?
If you have some crypto coins, one of the recommended methods is putting them in a safe wallet, waiting for the price to rise. However, you can take the coins and use them as collateral for a loan instead of selling them. When you repay back the borrowed money plus interest, your coins are returned.
Crypto lending started in early 2020 when COVID-19 pandemic hit the globe with severe effects. As loan became harder to get and lending for major items fell sharply, many people had to search for an alternative, and crypto lending proved to be that reliable option. It allows people to easily and rapidly get access to fiat money without selling their coins. It was like a new evolution because coin holders no longer had to leave them in their wallets for years as they struggled to access cash.
Special Benefits of Using Crypto Lending
One of the most notable benefits of using crypto lending is that it is pretty easy to get. As far as you have the coins that the selected DeFi platform supports, it is possible to get a loan against them. Other benefits include:
- Unlike banks, no credit score or financial background is checked.
- The funds are processed rather fast, allowing you to address emergency or financial shortfalls without delay.
- You get the cash you want without selling the crypto coins. So, you will still enjoy appreciation of the coins in the future.
- Unlike banks that require one to fill a lot of forms for application, crypto lending is pretty straightforward.
Despite the long list of benefits, the money you borrow has to be returned with some interest. Also, there is a risk of losing access to your coins if you fail to pay the money.
Special Tips for Crypto Lending
Now that you know how crypto lending works, we will now tell you some useful tips to help you use the service securely.
- Ensure to work with trusted decentralized platforms for your coin.
- Make sure that you are only using the coin as collateral as opposed to selling.
- Since you are borrowing, carefully review the interest and select the platform with the lowest rates.
- Always put a lot of focus on the security of your coins by ensuring no one gets to know your private key.
- Even when the lender is holding the coin, make sure to follow the price changes on the market. If the price reaches the targeted peak, do not hesitate to clear the loan immediately to get back the coins and sell at a profit.
Crypto lending is one of the new innovative products, and people love it. Instead of going to a local bank and following a lengthy process to access a loan, why not use cryptocurrency lending? It is easy, fast, and fun to use!