How Crypto Loans Work And Are They Worth it?


With the rising popularity of cryptocurrency, crypto loans have become a popular way of borrowing money. There are benefits as well as risks involved.

A Brief Overview of Cryptocurrency

Cryptocurrency is digital money. With the explosion of internet-based shopping around the world at the turn of the decade, consumers needed a way to pay for items securely. Thus cryptocurrency was born. Unlike credit or debit cards, cryptocurrency provides a fully anonymous and untraceable method of making payments.

What is a Crypto Loan?

A crypto loan is just like a regular loan. Essentially, you borrow real money against its equivalent amount in cryptocurrency. Think of crypto loans like mortgages. The lender reserves the right to take your cryptocurrency if you fail to repay the cashback on time.

There are many kinds of cryptocurrencies out there. Bitcoin is the first one that comes to mind. Other notable ones are Ethereum, Binance, and Tether. There are a lot of options available for taking out a crypto loan.

The price of cryptocurrencies is volatile. Bitcoin is a prime example of this. Its price has fluctuated wildly, going as high as $64,000 and low as 30,000 in 2021 alone. Despite that, the value of cryptocurrencies has steadily increased over the last decade.

If you have a large amount and do not know what to do with it, taking out a crypto loan can be your best option.

How to Get a Crypto Loan?

Most people store their cryptocurrencies in online wallets. They are extremely prone to hacking, and you might lose it all. Cryptocurrency sitting in your wallet is not of any use. It is much more beneficial to take out a loan against them if you cannot find anything to purchase.

Many online services provide crypto loans. If you are a first-time loanee, you may be hesitant about the whole process. Do not worry because there is a solution just for you. 

Platforms like Celsius and Nexo provide excellent banking services for all cryptocurrencies. Highly rated and strongly recommended by users globally, they are the bankers of the crypto world. 

The process is very simple. Simply register as a user, verify your account, and that’s it! If you have crypto, you are good to go. These platforms offer loans against a wide range of cryptocurrencies, so there is no shortage of choice.

Celsius vs. Nexo: A Deep Dive

Celsius and Nexo are both great platforms for all things crypto. They have a lot of similarities between them, with a few subtle differences. Let us take a closer look below.

Yield

In terms of yield, Celsius is the winner. Average owners invest around 5% of their current holdings into these platforms. The yield of Nexo will cap at 8% per year. On the other hand, Celsius users will see gains of up to 10%. 

There will be variations depending on what Celsius coin you invest in. Stablecoins provide interest on fiat currencies, and it is usually about 10%. Gold tokens depend on the price of gold, and cryptocurrency rates vary wildly due to their volatility. 

Nexo yield rates follow the same trend. The platform prides on its Next Tokens, which have paid a lot of dividends to their clients in 2021. Nexo’s process is much more streamlined, allowing you to earn a flat 8% interest. Depositing cryptocurrency is the only required step.

Fees

Celsius once again edges out Nexo as they provide sign-up bonuses. They always have a multitude of promotional offers available. There are no minimum deposit fees. You can withdraw and deposit without any additional cost. However, there is a daily limit on the amount.

Nexo has a set number of withdrawals you can make in a month. Their platform is designed around a tier system. It starts from the Base followed by Silver, Gold, and Platinum. Base tier users can make one free withdrawal, while Platinum users can make up to five. Transfers between multiple Nexo accounts are free of charge as well.

Consumer Friendliness

Users have reported Nexo as the better consumer choice. They have a simple process to make things easier for first-time clients. Simply invest and start earning interest right away. However, they do not provide bonuses, which may put off many first-time users.

Celsius has a wider array of consumer tools. That does not make it better, though. Celsius deals with a lot of coins and currencies. You may feel lost while navigating through it all. Their main advantage over Nexo is they provide various signing bonuses. Many first-timers find this compelling as they can start earning right away.

Both platforms have excellent customer service. They are 24/7 and provide real-time agents to address all your concerns. Most of your queries can be solved through their delta FAQ sections. If there is a more complicated issue, you simply have to call their helplines and talk to them directly.

The Risks of Crypto Loans

Taking out a loan from any source always carries risks. Crypto loans are not exempt from this rule. There are certain pitfalls you want to consider before deciding to invest in your cryptocurrency.

Traditional loans are insured. This means your loan and mortgage are both safe. For the most part, crypto loans have no such measures put in place. There is always a risk of losing your investment, but these are few and far between. 

The unpredictability of cryptocurrencies is also another issue to consider. Although exchange rates have steadily increased, they are subject to wild fluctuations. This can potentially alter rates, yields, and fees without warning.

Cryptocurrency is a relatively newer concept. The technology required to circulate and provide is still something people are trying to figure out. Many government agencies are still trying to figure out how to contend with this.

Final Thoughts

Any investment carries a substantial amount of risk. Most first-time investors are misinformed and end up making bad decisions. You must consider all options and acquire as much information as you can before taking out crypto loans. Celsius and Nexo are amazing platforms to help you get started.

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