Best Bitcoin Loan Rates In 2024

Secure the best Bitcoin loan rates in 2024. Understand the influencing factors and make smart decisions to enhance your digital currency gains.

January 2024 interest rates

*No longer functional

These rates are constantly adjusted. For an in-depth dive into each of these platforms, check out our guide to the best crypto loan platforms.

What is a Bitcoin loan?

A Bitcoin-backed loan is a way to borrow money using your Bitcoin as collateral. These loans allow you to benefit from the value of your Bitcoin holdings without selling them. Instead, you deposit your crypto into a lending platform or service, which then provides you with a loan in your desired currency. The loan amount is determined by the value of your Bitcoin collateral.

Our guide ‘How to Borrow Against Crypto - Decoding Crypto Loans’ tells you everything you need to know about lending your Bitcoin and other crypto.

Related Content: Compare Ethereum Loan Rates in 2024

How Do Bitcoin Loans Work?

Bitcoin loans use your Bitcoin as collateral. You deposit your Bitcoin into a lending platform, and in return, you receive a loan in fiat currency or stablecoins, usually within a day, or less. The loan amount is determined by the value of your Bitcoin collateral. 

You can do anything you like with the loan funds. Once you repay the loan over time, plus the interest, you get your Bitcoin back. In the event of non-payment, lenders can liquidate the collateral to recover their funds. 

Related Content: What Are Bitcoin Loans? And How Do They Work?

Benefits of Taking Out a Bitcoin Loan

There are several benefits to taking out a Bitcoin loan:

They’re fast 

Bitcoin-backed loans offer fast approval and processing times, allowing you to access funds when you need them. For example, Ledn’s B2X Loans are instant, and their Bitcoin-Backed Dollar Loans are typically funded within 24 hours of approval. Loan terms can be as short as seven days, or longer than a year. 

No need for credit checks

Unlike traditional loans, Bitcoin loans typically don't require a credit check. Your collateral is the key factor in securing the loan. As a result, people who might not be able to take out traditional loans can use them to access cash. 

Rates tend to be better

Crypto-backed loans require borrowers to provide crypto collateral, which sets them apart unsecured loans. This collateral requirement creates the relatively low interest rates associated with crypto-backed loans, so you’ll pay less interest than you would with high-interest options like payday loans or credit cards. This means you can potentially save on borrowing costs.

One way this happens is through Rehypothecation.

Rehypothecation is when platforms institutionally lend out loan collateral in order to generate income. This can potentially lower borrowing costs. It is done by both centralized crypto lending platforms and traditional lenders like banks.

Some crypto platforms use this income to subsidize loan interest rates. It also enables lenders to retain exposure to potential price appreciation in the cryptocurrency market while still using the borrowed funds for other purposes, such as investments, expenses, or leveraging trading strategies.

Platforms that keep collateral in cold storage tend to charge higher interest rates.

Ensure that the platform you choose has strong risk management and due diligence policies. If the value of the collateral significantly declines during the loan term, borrowers may face a margin call, requiring them to add additional collateral to maintain the required loan-to-value (LTV) ratio. Or, their collateral may be liquidated to pay out the loan outstanding balance upon reaching certain LTV.

Ledn engages in institutional lending in order to subsidize our clients’ borrowing rate. They carefully manage risks and conduct thorough due diligence on all our institutional lenders.  They’re also fully transparent in how they utilize platform assets via their monthly Open Book Report and Client Dashboard.

Related content: Proof of Reserves in Crypto, Explained

They’re globally accessible

Bitcoin loans transcend geographical boundaries. You can apply for a loan from anywhere in the world, as long as you have an internet connection. This global accessibility makes it easier for individuals in underserved or underbanked regions to access funds.

They’re private

Bitcoin loans offer a greater level of privacy compared to traditional loans. While traditional loans require extensive personal and financial information, Bitcoin loans often only require your Bitcoin collateral. This helps protect your privacy and personal data.

You can keep your assets

Taking out a Bitcoin loan allows you to keep your Bitcoin holdings while still accessing cash. As a result, you can explore other investment opportunities or meet financial obligations without sacrificing your long-term crypto investments.

How To Get The Best Bitcoin Loan Rates In 2024

To secure the best Bitcoin loan rates in 2024, follow these steps:

Understand Your Options

Explore different lending platforms and their terms. Some offer higher rates in exchange for greater security. For example, Unchained offers some of the highest rates, but their collateral is kept in cold storage. In contrast, Ledn’s rates are lower because they lend out collateral to subsidize rates. Our blog on the 15 Best Crypto Loan Platforms in 2024 breaks down the pros and cons of each of these options.

Pick the Right Platform

Choose a reliable and reputable platform that suits your needs. Look for factors such as competitive interest rates, a healthy track record, appropriate loan-to-value ratios, secure storage, and liquidity. Ledn has a proven track record of protecting client assets via strong risk management practices. Competitors like Abra, Voyager, BlockFi, and Celsius did not.

Understand What Affects Crypto Loan Rates

Factors like loan duration, loan amount, collateral requirements, and platform fees can all impact loan rates. 

In this blog, we’ll delve into these topics in more detail.

Types of Bitcoin Loans Available

There are different types of Bitcoin loans available. Let's take a closer look at two popular options:

Bitcoin-backed Loans

These loans use Bitcoin as collateral. You deposit your Bitcoin, and based on its value, you can borrow funds.

B2x Crypto Loans

B2x loans are a Ledn exclusive product that allow you to borrow against your Bitcoin to buy more bitcoin. They combine a Ledn Bitcoin-backed Loan with the purchase of an equal amount of Bitcoin. When the loan is repaid, both the collateral and the newly purchased BTC are returned to you.

Several factors influence crypto loan rates. You should consider:

Annual Interest Rate (APR)

The APR represents the annual cost of borrowing. Higher APRs mean higher costs. 

Here are examples of crypto loan costs at different Annual Percentage Rates (APR):

• If you borrow $10,000 for 1 year at 10% Annual Percentage Rate (APR), then you must repay $11,000 in total. This includes the original loan amount of $10,000 and $1,000 as interest paid across the loan term.
• If you borrow $10,000 for 1 year at 15% APR, then you must repay $11,500 in total. This includes the original loan amount of $10,000 and $1,500 as interest paid across the loan term.
• If you borrow $10,000 for 1 year at 20% APR, then you must repay $12,000 in total. This includes the original loan amount of $10,000 and $2,000 as interest paid across the loan term.

These examples are for illustrative purposes only. Actual loan costs may vary depending on the specific terms and conditions of the loan and the lending platform. 

Loan Duration

The length of time you borrow the funds affects the loan rates. Longer durations may result in higher rates, while shorter durations can lead to lower rates. This is because there is more time for potential fluctuations in the cryptocurrency market, increasing the risk for the lender.

Bitcoin Loan Amount and Collateral Requirements

The loan amount you request and the collateral you provide play a role in determining the rates. Generally, more collateral leads to better rates. For instance, if you borrow $5,000 and provide $10,000 worth of Bitcoin as collateral, you may get a better rate. This is because it reduces the lender's risk and provides more security for the loan.

Related Content: Crypto Loans Without Collateral 

Platform Fees and Other Costs

Some lending platforms charge fees that can impact the overall cost of borrowing. Compare different platforms and consider their fee structures. 

Credit Checks and Application Processes

While some platforms perform credit checks, others (like Ledn) have a simple and accessible model. With Ledn Loans, you only need a minimum of $1,000 USD equivalent in BTC collateral, and you are automatically approved without any further credit checks required.

Loan to Value Ratio (LTV)

Higher LTVs usually mean higher interest rates.  However, the lower your LTV, the more collateral you have to put up.  As a result, if that collateral is being rehypothecated, there’s a higher level of risk.

Conclusion

Bitcoin loans offer convenience, potential savings, and a quick way to access funds. To secure the best Bitcoin loan rates in 2024, take the time to explore your options, choose the right platform, and consider the factors that affect loan rates.

Sponsored by 21 Technologies Inc. and its affiliates (“Ledn”). All reviews and opinions expressed are based on my personal views.