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<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;"><span style="color:#9b59b6">Cryptocurrency-backed loans (commonly referred to as crypto
loans) have begun to change the global financial sector. For those with sufficient crypto assets, borrowing crypto against those assets held as collateral can be a seamless way to receive extra capital without selling their assets.</span>
</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Moreover, interest rates on crypto loans are typically more competitive than traditional
loans offered by banks and other financial institutions. Since they generally don’t require credit checks, the time it takes to complete a crypto loan application and receive your funds can also be significantly faster.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">However, many people ask whether getting a crypto loan without collateral is possible. The
short answer is “unlikely” at the moment. While some crypto lending platforms have started offering undercollateralized loans, receiving a loan with zero collateral is unheard of outside a few rare instances.</p>
<h2 id="h-why-borrowers-need-collateral-for-loans"
style="direction: ltr; box-sizing: inherit; font-family: proxima-nova, sans-serif; font-weight: 800; line-height: 1.3; color: rgb(43, 39, 42); margin-top: 20px; margin-bottom: 20px; font-size: 40px; clear: both;"><span
style="box-sizing:inherit; font-weight:400">Why Borrowers Need Collateral for Loans</span></h2>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">As a borrower, proving one has enough collateral to repay a loan is the most fundamental
part of the application process. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">The collateral required for borrowing doesn’t have to be physical cash. If a borrower
takes out a mortgage for a home purchase, the borrower’s home is often a form of collateral. Likewise, if a borrower takes out a car loan, the car is usually the collateral.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">With traditional loans offered by banks and other financial institutions, prospective
borrowers must jump through multiple hurdles. First, the lender might reject a borrower’s loan application if they haven’t built up a credit history or their credit score is too low. Even when lenders approve a loan application, the average
approval wait time is 52
days, <a rel="nofollow" href="https://static.elliemae.com/pdf/origination-insight-reports/ICE_OIR_MAR2021.pdf" style="box-sizing: inherit; background-color: transparent; color: rgb(4, 54, 104); text-decoration-line: none; transition: all 0.125s ease-in-out 0s;">according to a March 2021 report from Ellie Mae</a>.
</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">While both crypto loans and traditional loans both require collateral, crypto loans are a
bit different in that the loan application approval process can be quicker and the interest rates are oftentimes more competitive. Because crypto loans generally don’t require credit checks, borrowers get loan approval and receive funds much
faster than traditional loans.</p>
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<h2 id="h-why-crypto-loans-require-over-collateralization"
style="direction: ltr; box-sizing: inherit; font-family: proxima-nova, sans-serif; font-weight: 800; line-height: 1.3; color: rgb(43, 39, 42); margin-top: 20px; margin-bottom: 20px; font-size: 40px; clear: both;"><span
style="box-sizing:inherit; font-weight:400">Why Crypto Loans Require Over-collateralization</span></h2>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">For crypto loans, borrowers will use cryptocurrencies such
as <a rel="nofollow" href="https://www.abra.com/cryptocurrency/bitcoin/" style="box-sizing: inherit; background-color: transparent; color: rgb(4, 54, 104); text-decoration-line: none; transition: all 0.125s ease-in-out 0s;">Bitcoin</a> and
Ethereum as collateral for the loan. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Borrowers can then freely use the loan capital
to <a rel="nofollow" href="https://www.abra.com/blog/abra-propy-partnership-overview/" style="box-sizing: inherit; background-color: transparent; color: rgb(4, 54, 104); text-decoration-line: none; transition: all 0.125s ease-in-out 0s;">purchase a home with crypto</a>,
buy a car, and more. Crypto loans help to automate the entire loan process, including loan origination and repayment. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">With crypto loans, the lending platform doesn’t need to trust that borrowers will pay
back their loans on time because the lending platform knows the loan is over-collateralized.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">An over-collateralized loan is one in which the borrower is required to supply crypto
collateral up front that has a value greater than the initial value of the loan assets they receive (these values are often calculated in USD). </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">This rate, known as loan-to-value (LTV), varies for each crypto lending platform.
Borrowers receive lower interest rates with a lower LTV (more collateral). For example, at the time of this writing, Abra Borrow offers LTV ranging from 15% to 50% with rates ranging from 0% to 9.95%.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Crypto loans require over-collateralization for a couple of reasons. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">First, over-collateralization ensures borrowers are more likely to pay back their loans.
That’s because the collateral value exceeds the loan value. If the borrower doesn’t pay back the loan on time, they risk losing their collateral to the lending platform.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Second, the volatility of cryptocurrency prices means that the collateral value may drop
significantly as well as quickly at times. Requiring a higher collateral amount helps mitigate some of the risks for lenders.</p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;"></p>
<h2 id="h-risks-of-undercollateralized-lending"
style="direction: ltr; box-sizing: inherit; font-family: proxima-nova, sans-serif; font-weight: 800; line-height: 1.3; color: rgb(43, 39, 42); margin-top: 20px; margin-bottom: 20px; font-size: 40px; clear: both;"><span
style="box-sizing:inherit; font-weight:400">Risks of Undercollateralized Lending</span></h2>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Some crypto platforms are experimenting with undercollateralized loans, meaning
borrowers can receive a loan valued greater than their deposited collateral. On the surface, this concept appears to be more favorable for the borrower. However, undercollateralized loans can actually be quite risky for both borrowers and
lenders. Why? Because undercollateralized loans reinsert trust in the loan process. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">For some undercollateralized loans, the borrower might not even have to prove they have
sufficient collateral available. Further, a loan default could lead to financial losses not only for the lending platform but also potentially other affected users — such as lenders and borrowers that are financially connected to that same
platform. </p>
<p style="direction: ltr; box-sizing: inherit; margin: 0px 0px 1.5em; color: rgb(102, 102, 102); font-family: proxima-nova, sans-serif; font-size: 19px;">Recent history shows that requiring over-collateralization for all borrowers, from
retail users to large institutions, is a more sustainable business model than issuing zero-collateral or undercollateralized loans.</p>
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Login Remember * Register Top Crypto * Questions * Unanswered * Tags * Users * Ask a Question Ask a Question CRYPTO LOANS WITHOUT COLLATERAL 2023 0 votes asked 6 days ago in cryptocurrency by admin (3.7k points) Cryptocurrency-backed loans (commonly referred to as crypto loans) have begun to change the global financial sector. For those with sufficient crypto assets, borrowing crypto against those assets held as collateral can be a seamless way to receive extra capital without selling their assets. Moreover, interest rates on crypto loans are typically more competitive than traditional loans offered by banks and other financial institutions. Since they generally don’t require credit checks, the time it takes to complete a crypto loan application and receive your funds can also be significantly faster. However, many people ask whether getting a crypto loan without collateral is possible. The short answer is “unlikely” at the moment. While some crypto lending platforms have started offering undercollateralized loans, receiving a loan with zero collateral is unheard of outside a few rare instances. WHY BORROWERS NEED COLLATERAL FOR LOANS As a borrower, proving one has enough collateral to repay a loan is the most fundamental part of the application process. The collateral required for borrowing doesn’t have to be physical cash. If a borrower takes out a mortgage for a home purchase, the borrower’s home is often a form of collateral. Likewise, if a borrower takes out a car loan, the car is usually the collateral. With traditional loans offered by banks and other financial institutions, prospective borrowers must jump through multiple hurdles. First, the lender might reject a borrower’s loan application if they haven’t built up a credit history or their credit score is too low. Even when lenders approve a loan application, the average approval wait time is 52 days, according to a March 2021 report from Ellie Mae. While both crypto loans and traditional loans both require collateral, crypto loans are a bit different in that the loan application approval process can be quicker and the interest rates are oftentimes more competitive. Because crypto loans generally don’t require credit checks, borrowers get loan approval and receive funds much faster than traditional loans. * crypto * loans PLEASE LOG IN OR REGISTER TO ANSWER THIS QUESTION. 1 ANSWER 0 votes answered 6 days ago by admin (3.7k points) Best answer WHY CRYPTO LOANS REQUIRE OVER-COLLATERALIZATION For crypto loans, borrowers will use cryptocurrencies such as Bitcoin and Ethereum as collateral for the loan. Borrowers can then freely use the loan capital to purchase a home with crypto, buy a car, and more. Crypto loans help to automate the entire loan process, including loan origination and repayment. With crypto loans, the lending platform doesn’t need to trust that borrowers will pay back their loans on time because the lending platform knows the loan is over-collateralized. An over-collateralized loan is one in which the borrower is required to supply crypto collateral up front that has a value greater than the initial value of the loan assets they receive (these values are often calculated in USD). This rate, known as loan-to-value (LTV), varies for each crypto lending platform. Borrowers receive lower interest rates with a lower LTV (more collateral). For example, at the time of this writing, Abra Borrow offers LTV ranging from 15% to 50% with rates ranging from 0% to 9.95%. Crypto loans require over-collateralization for a couple of reasons. First, over-collateralization ensures borrowers are more likely to pay back their loans. That’s because the collateral value exceeds the loan value. If the borrower doesn’t pay back the loan on time, they risk losing their collateral to the lending platform. Second, the volatility of cryptocurrency prices means that the collateral value may drop significantly as well as quickly at times. Requiring a higher collateral amount helps mitigate some of the risks for lenders. RISKS OF UNDERCOLLATERALIZED LENDING Some crypto platforms are experimenting with undercollateralized loans, meaning borrowers can receive a loan valued greater than their deposited collateral. On the surface, this concept appears to be more favorable for the borrower. However, undercollateralized loans can actually be quite risky for both borrowers and lenders. Why? Because undercollateralized loans reinsert trust in the loan process. For some undercollateralized loans, the borrower might not even have to prove they have sufficient collateral available. Further, a loan default could lead to financial losses not only for the lending platform but also potentially other affected users — such as lenders and borrowers that are financially connected to that same platform. Recent history shows that requiring over-collateralization for all borrowers, from retail users to large institutions, is a more sustainable business model than issuing zero-collateral or undercollateralized loans. PLEASE LOG IN OR REGISTER TO ADD A COMMENT. Welcome to Top Crypto CATEGORIES * All categories * Cloud Mining (11) * Play to Earn (2) * cryptocurrency (21) * Top coins (8) RELATED QUESTIONS 0 votes 1 answer Can I Get a Crypto Loan 2023 Without Collateral asked 6 days ago in cryptocurrency by admin (3.7k points) * crypto * loan 0 votes 1 answer what are meme coins crypto 2023 asked 2 days ago in cryptocurrency by admin (3.7k points) * meme * coins * crypto 0 votes 1 answer what is hodling in crypto 2023 - holding crypto 2024 asked 2 days ago in cryptocurrency by admin (3.7k points) * crypto * holding 0 votes 1 answer best meme crypto to buy right now 2023 asked 1 day ago in Top coins by admin (3.7k points) * crypto * meme * coin 0 votes 1 answer how to spot a pump and dump before it happens crypto 2023 asked 2 days ago in Top coins by admin (3.7k points) * pump * dump * crypto * bitcoin * Send feedback Snow Theme by Q2A Market Powered by Question2Answer ...