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How to Find Reputable and Safe Crypto Lending Platforms?

Mark John

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How to Find Reputable and Safe Crypto Lending Platforms

Image by Miloslav Hamřík from Pixabay

The crypto industry offers several methods to make money out of it. Crypto enthusiasts generally tend to hold their assets until price appreciation. But the industry has introduced another strategy-crypto lending, that allows users to make money with idle crypto assets. It means users can earn passive income with their cryptos instead of keeping them in the wallet. However, the overall crypto lending experience of users dramatically depends on the lending platform they choose. Therefore, it is crucial to choose the right lending platform.

In this article, we have discussed crypto lending and how one can find a reputable and safe crypto lending platform.

Keep reading!

What is crypto lending?

Crypto lending is a process that allows the investor to earn dividends by lending out their cryptos to borrowers. Investor/lender remains the sole owner of his assets. It is an effective way to earn passive income through an interest ranging between 4% to 17% yearly.

On the other hand, the borrower has to deposit some collateral (cryptos), and he agrees to pay an interest rate to the investor for a crypto loan.

How does crypto lending work?

Crypto lending happens through a third-party platform connecting lenders and borrowers. It involves the following steps.

A borrower requests a loan through a crypto lending platform. Once the platform approves the loan request, the borrower has to stake his cryptos as collateral. The lender automatically transfers the loan amount to the borrower’s account through the platform. The investor receives regular interest payments paid by the borrower.

The value of the collateral is always more than the loan amount. The borrower cannot use his staking till the end of the lending period. He must pay off the whole loan amount to get back his collateral. If the borrower does not return the loan, the lender can sell the locked collateral to cover his losses.

How to find a safe and reputable crypto lending platform?

When it comes to cryptocurrency, there are a lot of things you have to consider. Generally speaking, crypto is a so-called digital currency that can be exchanged for goods and services. In contrast to money lending, in the crypto market by lending crypto investors borrow loans in cash or cryptos. On the whole, there are two parties that are involved in the crypto world such as lenders and borrowers between whom transactions are going to happen by the lending platforms.

Crypto lending platform plays a crucial role in the entire crypto lending process as the user entirely depends on it. Therefore, the user must choose a lending platform very carefully. The following are the few parameters that can help to find out the right lending platform.

Security

Security should be the first concern when looking for a crypto lending platform. Different lending platforms have different terms and conditions for lending. The lending platforms may vary on how they act to safeguard the investor if the borrower fails to pay off the loan amount.

Choose a platform that offers some backup system to help their users cover their losses in case of any hack.

User feedback

User feedback is the key factor to finding out if the platform is trustworthy or not. Always check what community is talking about the platform.

Choose the one with good user reviews. Discuss with other people to learn about their experience with the platform.

Interest rate

Interest rate is the amount user earns as profit on their assets. It is what investors are most interested in. Different lending platforms offer different interest rates depending on the coin user is lending. The interest rate is generally 3% to 7% for crypto coins and higher for stable coins, up to 17%.

Choose a platform that offers a high-interest rate, but it should not be over-promising either.

Supported Cryptos

Different lending platforms support more or fewer cryptos depending upon location and other factors. Check out the number of different cryptocurrencies a platform supports for lending purposes.

A platform with a wide range of supported cryptocurrencies should be preferred. Cryptocurrencies are highly volatile; choosing the right crypto supported by the platform can bring you better profit.

Service

Some crypto lending platforms charge hidden charges on their services or have different terms and conditions, such as minimum balance requirements.

Choose a user-friendly platform that does not charge any hidden charges on its services. The minimum balance requirement should not be high.

Examples of safe and well-reputed crypto lending platforms

The following are some of the most popular crypto lending platforms in terms of the services they offer.

  • Celsius Network
  • CoinLoan
  • BlockFi
  • YouHodler
  • Crypto.com
  • Binance
  • Nexo
  • MakerDAO

Conclusion

The parameters mentioned above can help choose the right lending platform. Crypto lending is rewarding, but it comes with some risks such as volatility, etc., which users must know before stepping into this sector. However, it is worth giving it a try to earn passively with cryptos.

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