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Do you need alternative ways to earn on your crypto in 2022? Lending is a popular option for increasing your earnings. In this article, we discuss crypto lending, the top five cryptocurrency lending platforms, and how to choose the right platform for your lending needs. Keep reading to learn more.
What is a Cryptocurrency Loan?
This loan is essentially the cryptocurrency version of traditional bank loans. It involves the use of fiat or crypto collaterals to access funds. The collateral is held by the lending platform and returned upon payment of the loan and its interest. Cryptocurrency loans have far higher interest rates than their traditional counterpart.
What is a Crypto Lending Platform?
An easy way to understand lending platforms is by looking at the parties involved. There is a borrower who requires cryptocurrency, a lender who wants to invest theirs, and a company that can connect them. This company, the third party, is the crypto lending platform. It can be centralized or decentralized.
How to Choose the Right Crypto Lending Platform
The following are steps to follow in selecting the right lending platform:
- In choosing the right platform, a KYC or Know Your Customer process is something to look out for. KYC boosts investor confidence and assures them that there is minimal risk of regulatory backlash. However, there are trustworthy platforms that operate without KYC, granting you access through emails with 2FA authentication.
- You should also check whether the platform is centralized or decentralized. Centralized platforms offer high yields but may be outstripped by Defi platforms which give total control over your assets.
- Also, you should check the type of interests available on each platform. With compound interest, you can earn on your investment and the interest you gained from it. On the other hand, simple interest allows quicker withdrawal times but lower returns.
- Similarly, you should not neglect the interest rates on platforms. To build trading activity around a project, platforms may offer higher interest rates. Popular ones, on the other hand, may attract less returns. You should also be wary of exorbitant interest rates, especially when they exceed 25%.
- Lastly, conduct exhaustive research on your chosen project. Metrics such as transparency, regulatory compliance, and platform security are things to look out for.
Top Crypto Lending Platforms for 2022
CoinRabbit
Nowadays there is a lot of crypto platforms that are pretty hard to use, especially for the newbies. KYC procedures are long and the interface is complex. You will be very lucky to find out that the CoinRabbit platform exists.
It is a crypto lending platform that transacts similarly to traditional finance institutions. It allows users to lend and borrow cryptocurrency in return for interest. Lenders earn 10% APY on their investment while borrowers get an APR of 14%. What you will be fascinated with is the fact that the LTV (Loan-to-Value) is flexible and 50%. You don’t need to have any special platforms tokens to enjoy the full experience, which is also highly valued today.
The platform has a minimum deposit of USD 100 and a USD 100,000 maximum. CoinRabbit secures funds using cold storage wallets. In the event that a collateral asset reduces in value, CoinRabbit alerts borrowers through Email and SMS channels.
CoinLoan
Founded in 2017 in Estonia, CoinLoan is a licensed crypto lending platform that offers Instant Loans against your crypto collateral.
With its maximum loan-to-value ratio pegged at 70% and APR as low as 4,95% for loans with 20% LTV, users can instantly borrow funds for any needs while making their digital assets work.
There are no deposit or withdrawal charges and investors can explore more than 140 currency pairs. CoinLoan also offers Interest Account service with up to 12.3% APY and Crypto Exchange with no fees for deposits or withdrawals.
Ledn
Established in 2018 by Adam Reeds and Mauricio di Bartolomeo, Ledn is a platform with a difference. It is exclusively available for Bitcoin and USDC transactions. It is located in and duly incorporated under the Federal Laws of Canada. Ledn allows users to take Bitcoin-backed loans, with APY for Bitcoin at 6.25% and 9.50% for USDC. Investors are also free from withdrawal and transfer charges. In addition, when users’ Bitcoin collateral records gains, the profit accrues to them. However, if it drops, the user is informed to increase the collateral. The maximum LTV is 50%.
Hodlnaut
Hodlnaut is a Singapore-based platform which allows users to earn on their deposits. The platform lends assets to and credits users with interests as high as 12.73%. However, interest rates depend on the cryptocurrency and its market performance. Hodlnaut does not charge fees on deposits but imposes withdrawal fees which vary by token. In addition, there is a USD 20 bonus on deposits of USD 1000 and above.
BlockFi
BlockFi is a US-based platform that offers all users regulatory protections. Its APY ranges from 3% to 8.6%, depending on the project. On BlockFi, you can set your account to automatic trading, a method that allows you to trade periodically and record interests. The platform allows users to access one free withdrawal per month after which it imposes fees. It also pays interest on a monthly basis.
Bottomline
Cryptocurrency lending is on the rise and it is only set to grow in 2022. Platforms are also more competitive than ever, rebranding offers to attract customers. However, to secure the best, research adequately to protect yourself from undue loss.