What is crypto lending and how does it work?

Crypto lending allows you to take out a loan using cryptocurrency as your collateral assets. You could also be on the other side of the loan and be the lender to earn returns from the interest on the loan. Crypto lending can be done through a decentralized finance (DeFi) platform, which connects lenders to borrowers and vice versa.

Is crypto lending safe?

Cryptocurrency lending is a double-edged sword. On one hand, most loans are collateralized, and even in the event of a default, lenders can recoup their losses via liquidation. They also offer much higher interest rates on deposits than traditional bank accounts.

What are the different types of crypto lending platforms?

There are two main types of crypto lending platforms: decentralized crypto lenders and centralized crypto lenders. Both offer access to high interest rates, sometimes up to 20% annual percentage yield (APY), and both typically require borrowers to deposit collateral to access a crypto loan.

How much does a crypto loan cost?

Though some crypto loans offer low rates, most crypto loans charge over 5% APR, with some charging up to 13% APR (or more). 11 To apply for a crypto loan, users will need to sign up for a centralized lending platform (such as BlockFi) or connect a digital wallet to a decentralized lending platform (such as Aave ).