Binance Loans—A Complete Platform for Borrowing Crypto
When crypto first started gaining popularity, crypto investors were limited to simple buying and selling of cryptocurrencies against fiat currencies. However, as the market has evolved, crypto investors can now access a wide range of trading and financial services. In this article, we will focus on crypto-secured loans, which allow you to use your crypto as collateral to borrow funds. After repaying the borrowed funds (plus interest), you have access to your collateral.
These days, crypto loans are offered by a plethora of crypto firms. This includes Binance, which is the largest cryptocurrency exchange in the world by number of users and trading volume. The exchange’s crypto loan offering is called Binance Loans, and it has some of the best feature sets of any crypto loan product.
Get a crypto loan on Binance
Before we take a closer look at Binance lending, let’s explore the concept of crypto lending more broadly.
What are the advantages of crypto loans?
Cryptocurrency-backed loans such as those offered by Binance Loans have a number of unique advantages. Let’s take a look at some of the top reasons users decide to borrow against their crypto.
Use the value of your crypto without selling it
Crypto-backed loans allow you to get something out of your cryptocurrency holdings without having to sell them. You can use your coins as collateral to take out a crypto loan and access another asset while keeping your original coins. In particular, you can use volatile crypto assets like Bitcoin or Ethereum to borrow stablecoins, which opens up some interesting options.
Possible tax benefits
Depending on where you live, using your crypto to borrow funds might be better from a tax perspective than selling it. For example, let’s say you want to use the earnings you’ve made from your crypto investment to buy something. Using your crypto as collateral to borrow stablecoins or other assets and then spending them to acquire what you want could lead to a more favorable tax situation than if you simply sold your crypto to get fiat currency. However, this will depend on your country’s tax laws.
No credit score check
Most crypto lending products, including Binance loans, do not require you to pass credit checks before you can take out a loan. The reason for this is simple: the loans are over-collateralized, so the lender has the opportunity to manage their risk by liquidating the collateral.
What are the disadvantages of crypto loans?
Whenever you are dealing with cryptocurrency, there are certain risks involved. Here’s what could go wrong when using crypto loans.
Your guarantee could be liquidated
Loans such as those offered by Binance Loans must be over-collateralized. In other words, the value of your collateral must exceed the value of the borrowed funds by a certain amount. The ratio between collateral and borrowed assets is expressed by the LTV (loan-to-value) ratio.
If the value of your collateral drops, the LTV of your loan will increase. If it increases too much, your collateral could be in danger of being liquidated. If your collateral is liquidated, it will be sold and you will no longer be able to access it. However, you will be able to keep your borrowed funds.
You need to trust a third party to hold your coins
Many people like cryptocurrency because it is a type of currency that is independent of third parties like banks. However, if you want to avail crypto loans, you must deposit your coins on a cryptocurrency exchange, which effectively gives control over the exchange to your private keys. If that’s not something you’re comfortable with, crypto loans aren’t for you.
You can consider using decentralized crypto lending platforms like Aave, although they come with their own set of risks, which are related to smart contract security.
Why Binance Loans is one of the best platforms for crypto loans
Now that we’ve looked at the pros and cons of crypto lending in general, let’s focus on the unique benefits of the Binance Loans platform.
- Borrowed cryptocurrency can be used in any way
- The platform supports a large number of coins for loans and collateral
- Binance Loans offers a lot of information that will help you decide if the loan is worth it or not
- Flexible loan terms and repayment options
- Loan staking can be used to reduce interest payments
You can use the borrowed crypto as you wish
After borrowing crypto assets through Binance Loans, you have full control over them. You can even withdraw them from Binance if you wish. If you withdraw the coins to your own wallet, you can simply keep them or use them in DeFi protocols, NFT markets, etc. Alternatively, you can keep borrowed coins on Binance and use them in the exchange’s product suite.
Large number of coins are supported for loans and collateral
One of the main reasons so many traders choose Binance is that the exchange lists hundreds of different cryptocurrencies. This means that it doesn’t matter if you want to stick with big coins like Bitcoin and Ethereum or if you’re also interested in smaller altcoins – if a coin is worth owning or trading, it’s probably already listed on Binance.
This wide selection of cryptocurrencies does not only apply to trading, as it also extends to the Binance Loans product. You can use Binance Loans to borrow over 160 different types of cryptocurrency, and over 50 different coins are accepted as collateral.
All key information is presented transparently before borrowing
When you are in the process of borrowing funds through Binance Loans, the platform will provide you with all the information you need to make an informed decision. You can see all the key LTV levels (initial, margin call and liquidation), the price at which your collateral will be liquidated, the interest rate (expressed in both hourly and daily terms), the amount you will pay in interest, and the total amount of the reimbursement.
By knowing all this information, you will be able to assess your situation and decide if the terms of the loan are right for you.
Flexible loan terms and repayment options
On Binance Loans, you can borrow funds for 5 different time periods, ranging from 7 days to 180 days. However, you can choose to repay the loan at any time at no additional cost. If you borrow funds over a term of 30 days, for example, you can repay the loan in 10 days without incurring penalties.
Binance Loans charges interest on an hourly basis. When you repay a loan, you only have to pay the interest that has accrued up to the time of repayment. In other words, you can save money by paying off the loan early.
Save on interest rates with Loans Staking
When borrowing funds through Binance Loans, you can save money by choosing a Proof-of-Stake cryptocurrency as collateral. This is possible thanks to “Loans Staking”, a feature that uses the return from staking to subsidize interest payments.
For example, if you are using DOT as collateral, Binance will stake your DOT and then use the funds earned from staking to cover the interest rate that would normally be charged. In many cases, you can reduce the interest rate to 0 this way.
Here are some examples of coins supported for loan staking on Binance Loans:
Conclusion—why Binance Loans is worth checking out
If you are looking for a crypto loan, Binance Loans is definitely an option to consider. One of its best features is the amount of supported cryptocurrencies, which makes the product useful for almost all crypto investors, regardless of the cryptocurrencies they hold. The platform also does a good job of presenting all the most important parameters of the loan in a transparent way, which makes it easier to decide whether to borrow funds or not.
Of course, you should keep in mind that crypto lending comes with risks. Due to the volatility of the cryptocurrency markets, your collateral could lose value, which could trigger a margin call or even a liquidation in the worst case.