At first glance, it can be seen that lenders use the profits they make through loans, and borrowers do business with the loans they take out. Over the years, the lending industry has made borrowing safer and easier. Digital currencies have not been left out of the industry, and the cryptocurrency market has shifted to digital currency lending. In addition to answering several important questions about digital currency lending, this article introduces some digital currencies that lend to their users.
Lending with digital currency guarantee!
Lending currencies is probably an interesting topic for you as well. A digital currency guarantee means that the loan you receive is backed by digital currency.
Using this method is very fast as well as direct. The way it is done is that when the lender receives, for example, bitcoin from the borrower, the borrower quickly gets the loan that he was supposed to receive at the same time. The central bank is considered an intermediary for obtaining loans in traditional lending but not digital currency lending. There are some significant features of digital currency backed loans, some of which are as follows :
- Its practicality
- Change in the type of tax liabilities
- Type of lending process
Its practicality
Repaying the loan to the lender becomes much easier, and the borrower can use the loan he has received in various ways. But when borrowing traditionally, the borrower must explain in detail to the lender how to use the loan. This can be a reason for people to get cold loans.
Some of the applications of digital currency guaranteed loans are:
- To secure and pay debts
- Financing a contract for the borrower
- Diversify the investment as well as diversify the investor’s portfolio
- Invest in other assets
- Pay for expenses such as travel expenses using digital currencies
Change in the type of tax liabilities
Your taxes will be reduced when you plan to get a loan backed by digital currency. Because in this type of lending, the desired property is not considered for sale. Thus, the borrower pays less tax by receiving money in this method.
In the meantime, two factors can change the type of tax liabilities of loans secured by digital currency, which are:
- Digital currencies can be considered as assets. As in traditional lending, the borrower’s property is considered collateral. Loans secured by digital currencies will not be subject to capital gains tax.
- Depending on the purpose of the loan, interest can be taxed on the proceeds. For example, in a loan taken out to buy or invest in real estate, property tax can be deducted. But loans taken out for personal use do not need to be taxed.
Type of lending process
In loans secured by cryptocurrencies, the parties (the borrower and the lender) will meet their own needs. The lender pays the real money to the borrower, and the borrower sends the digital currencies to the lender’s wallet.
After the borrower pays the loan installments, the lender also transfers the digital currencies as collateral to the borrower’s wallet.
In addition to all of the above, there is a team in the lending process that monitors the performance of the loan and sends the report to the lender within a day. The group offers a loan to both parties, which has the following features:
- The individual determines the terms of the loan.
- Interest rates will start at 8%.
- The lender has the exact details of Ramzarz; Because if the borrower does not have a repayment, he can defend his right.
- Determining the loan creation fee
- The annual percentage rate indicates the total value over a year.
So far, we are familiar with the types of loan transactions secured by cryptocurrencies. The question arises for us whether such loans are in the interest of both parties (lender and borrower)?
As you know, in traditional loans, a contract must be made between the lender and the borrower, which a lawyer usually writes. But this is not the case with digital currency lending, and only Fiat (real) money and crypto (cryptocurrencies) are exchanged, and there are no complicated contracts.
Crypto-secured loans have features that make them useful to both parties.
Benefits of digital currency backed loans for both lender and borrower
Benefits for the lender
- In this method, the repayment of the received loan is made in full; Thus, the risk of lending to the lender is reduced. By doing this, we move towards a powerful and automated system that guarantees banking transactions.
- This type of lending can be done as a global network; That is, the lender has access to the borrower worldwide. This type of loan has made crypto a valuable international investment.
- In this type of loan, the lender can give the desired loan in the form of any digital currency and through the bank can facilitate the conversion of that digital currency into Fiat money.
- If the borrower can provide adequate guarantees to the lender and the lender has sufficient funds for large loans, there is no limit to the loan amount.
- Anyone can lend to others in this context and be a lender.
Benefits for the borrower:
- If for any reason the borrower is unable to repay the loan in full, the cryptographic asset given to the lender at the outset is retained, but the lender is not permitted to sell it.
- At the time of receiving the loan, the existing rules are flexible and make the loan terms easy for both parties.
- The borrower can borrow as much as the value of the collateral (digital currency), and there is no repayment record like traditional loans.
- Anyone applying for a loan can use Bitcoin, Ethereum, and Light collateral.
- There is no need to worry about withdrawing and receiving a loan, and transactions can be done through any bank in the world.
Platform lending system
Decentralized financial platforms or Defi are among the media with a lending system. Crypto lending is how you can lend as much digital currency as possible and make a profit. Bitcoin, Ether, and Stable Coins are some of the cryptocurrencies you can use to participate in this lending system.