Crypto lending is growing at a rapid pace, and it is helping increase crypto adoption around the world. The traditional loan industry is facing fierce competition from the crypto lending industry. We believe that crypto lending will change the global loan industry for good.
The crypto community has seen tremendous benefits from crypto lending. It has revolutionized the loan industry by making it easier to obtain loans. Crypto-backed loans have comparatively lesser requirements than banks do.
So, is everything good and dandy with crypto lending? Yes, crypto lending is excellent! In this article, we will present the main advantages of crypto lending. You will also learn why you should opt for crypto lending instead of traditional lending methods.
Recommended read: Crypto Lending 101 - All lending jargon explained.
This article discusses the following arguments:
Traditional bank lending is a lengthy process. Traditional lenders check your credit score to determine your eligibility for receiving loans. It also helps them decide how much you can borrow from them. You are unlikely to get funds from traditional lenders if you have a low credit score. Traditional lenders won't give you a loan even if you don't have a credit score.
Further down the road, let's assume that a bank has decided to offer you a loan. They will demand lots of personal information from you. They will ask you for information such as proof of employment, your social security number, government-issued ID, bank statements, and many more. Moreover, bank loans aren't flexible like crypto lending. Hence, you won't be in control of the final loan terms. The banks will decide on the loan amount and the interest rate.
Currently, 1.7 billion do not have access to bank accounts. Hence, it is almost next to impossible for them to obtain a traditional bank loan. Crypto lending can offer loans to the globally unbanked population. The majority of crypto lending platforms don't require a bank account. They don't even check the credit score and credit history of a borrower. Thus, getting loans from crypto lending platforms is easier and more accessible than traditional loans.
Want a loan as fast as possible? Good luck with that if you are planning to take a loan from traditional banking channels. It usually takes a few days to a few weeks to obtain a loan from banks. Many banks do approve loans within 24 hours, but it depends on several factors.
There's one excellent option if you want a loan within 24 hours. Yes, I am talking about cryptocurrency lending here. Most of the crypto lending platforms will approve all loans within one day. They do ask for a user identity card. But they don't demand a long list of documents to determine your eligibility. They will issue a loan within 24 hours if you have a government-issued ID and enough crypto assets to deposit as collateral. For example, YouHodler provides you with instant cash loans from their fiat fund.
If you are planning to take out a loan from the P2P crypto lending platforms, then it may take longer. They require cooperation from both the lenders and the borrowers. Hence, P2P crypto loans are not faster. Any user that needs funds within 24 hours must not rely on P2P crypto lending platforms.
You won't have much of a choice when you take a loan from a bank. The final decision about the amount of a loan you can borrow and the interest rate rests on the bank. You are free to visit multiple banks to decide on the best offer. Yet, there won't be much of a difference between banks.
When it comes to crypto lending, the borrower has a lot of options to customize their loan terms. It is the borrower who decides how much they want to borrow, for how long, and the loan-to-value ratio. They are also free to decide if they want to receive funds in stablecoins or fiat currencies. Of course, the amount that you can borrow depends upon the collateral value. All other loan terms are far more flexible.
Traditional banks have cumbersome fee structures. Want to convert your loan to a different fiat currency? Think twice! It’s because banks charge an exorbitantly high fee for it. Now, top it up with a poor exchange rate. It means that you are losing quite a bit of money in the process.
As for the fee structure in crypto lending, they are not structured yet but it is confirmed that crypto lending platforms charge lower fees when compared to traditional lending channels. They usually only charge a one-time service fee. There are no other fees throughout the process.
Another advantage of crypto lending is that they won't hit you with exorbitantly large fees if you want to get paid in different fiat currency. It depends on the borrower to decide in which currency they would prefer to get paid out in. Many cryptocurrency lending platforms, such as YouHodler, allow borrowers to get funds in both stablecoins and fiat currencies.
There is a misconception among the majority of the world population that their money is safe with banks. That is far from the truth. The reality is that many banks have been involved in laundering scams, such as the infamous HBSC laundering event. Humans are at the helm of the banks. As we know, humans are fallible. Hence, they often miss out on using high-tech security measures to keep banks safe.
Many are afraid of crypto lending, as they believe it to be risky. The truth is that crypto lending platforms are far more secure when compared to banks. The majority of the crypto lending platforms provide a clear outline of the security measures they have implemented.
Most of the crypto lending platforms store 95% or more funds in cold wallets. Hence, it is next to impossible to hack them. All crypto lending platforms give due importance to security. It’s because a failure to keep user funds safe can prove to be a death blow to their business.
There's no doubt that crypto lending is still in its infancy stage. Yet, we cannot deny that the crypto lending segment is growing day-by-day. The current crypto lending market size exceeds $10 billion in terms of total loan origination. The growth of crypto lending will increase accessibility for receiving loans globally. Hence, we believe that crypto lending will play a game-changer role in the financial industry.