Loan Management Tips: A step-by-step guide on how to respond to a Collateral Top-Up

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Tips for Managing Your Loan

Bitcoin markets can get volatile at times, and we like to remind our loan clients about the options they have to manage their loans and maintain a healthy LTV ratio. The LTV or "loan-to-value" ratio is the number you get when dividing the outstanding dollar amount by the market value of the bitcoin collateral. A healthy LTV ratio is any number below 70%. When the LTV ratio reaches 70%, our system will send a courtesy notification to let you know that additional bitcoin collateral is required in order to maintain a healthy LTV ratio. If and when that happens, we request as much additional bitcoin as is required to bring your LTV back to 50%. It is important to monitor this level closely, as Ledn must take action to sell sufficient bitcoin to repay and close the loan if the LTV ever reaches 80%.

In this blog post, we will summarize the options that loan clients have when they receive a requirement for additional collateral.

 

You received a notification that your Loan is at a high LTV - now what?

 

Step 1: Log into your Ledn account and check the status of your loans

Once logged into your Ledn account, you need to click on Borrow tab if you have any open Bitcoin-backed loans, and/or on B2X tab if you have any open B2X loans. If you have one of each make sure you visit both pages to verify the status of all open loans. Below is what the dashboard screen looks like and where the tabs are located:

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In this example, there is a B2X loan that needs to be topped up. Once we click on the B2X tab, you'll see the following screen:
 
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Once in the Active Loans tab, you will see your active B2X loans, and the B2X loans that need to be topped up will be highlighted in red. You can then click on either "Top-Up" (add more bitcoin) or "Repay" (repay the loan) - we go over these options in detail below:

Step 2: Select Option to Meet Top-Up Requirement(s)

When it comes to managing your loan, there are several options available to you so that you maintain a healthy LTV. 

  1. Top-Up by sending more bitcoin to your Ledn Loan from a 3rd party wallet (i.e. bitcoin you may have on an exchange or in a self-hosted wallet).
  2. Top-Up by sending more bitcoin to your Ledn Loan from your Ledn Bitcoin Savings account.
  3. Repay your Ledn Loan instantly with bitcoin (not currently available for U.S. residents).
  4. Repay your Ledn Loan with USDC.
  5. Repay your Ledn Loan through a U.S. dollar wire transfer.

Options to Top-Up your Bitcoin for each Loan:

Please remember that you can add additional bitcoin to top up your loan collateral at any point in time during the term of your loan, you do not have to wait until your LTV reaches 70%. The Top-Up address assigned to your loan is unique and will not change for your bitcoin-backed loan/B2X.

A. Top-Up by sending more bitcoin from a 3rd party wallet (exchange or self-hosted wallet):

First, locate the collateral top up address for your loan by clicking the "Top-Up" option for that loan - after you click "Top-Up", the following screen will appear:

Screen Shot 2021-01-11 at 2 (1)

Once you have located your loan top-up bitcoin address, you can copy it and send Bitcoin from a 3rd party wallet to your Ledn Loan address to meet your collateral requirement.  

B. Top-Up by sending more bitcoin from your Ledn Bitcoin Savings account:

If you have a balance on your Ledn Bitcoin Savings Account, sending bitcoin to your loan collateral top-up address is fast and easy - you can simply request a withdrawal from your Bitcoin Savings account to your loan collateral Top-Up address. You can locate your loan's collateral Top-Up address by following the steps above.

Remember you must add bitcoin to each of your Ledn loans that are below their required LTV level.

Options to Repay your Loan:

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C. Repay your loan instantly with bitcoin (not currently available for U.S. residents):

You can use our "Repay with Bitcoin" feature to repay your loan at anytime. You can find the option by clicking on the "Repay" option for any loan in your "Active Loans" tab. A repayment menu will then appear (as seen above). You can then select the "Repay in Bitcoin" option and follow the steps prompted.

D. Repay your loan with USDC:

Loan clients also have the option to repay their loan with the USDC balance on their Ledn USDC Savings account. To repay the loan using this option, simply select the "Repay with USDC" option on the repayment menu for your loan and follow the steps prompted. Note: you will only be able to use this option if you have a sufficient balance for the repayment on your Ledn USDC Savings account. Repayments in USDC can take 1-2 business days to process. Please note that loans remain open until the repayment is posted on to the Loan. If a the repayment is not received and posted, you may still be subject to liquidation if your LTV remains high.

E. Repay your loan through a U.S. dollar wire transfer:

Last but not least, there is also the option to repay your loan via wire transfer. To repay through a wire transfer payment, simply select the "Bank Wire Transfer" option from the repayment menu for your loan and follow the steps prompted. You will receive Ledn's banking details for your wire transfer payment. Repayments in via wire transfer can take 1-2 business days to process. Please note that loans remain open until the repayment is posted on the account. If a the repayment is not received and posted, you may still be subject to liquidation if your LTV remains high.

As you can see, there are many ways in which you can keep a healthy LTV level. While we can't predict the price moves, we can certainly be prepared to react accordingly if and when they happen!

We hope you find these tips helpful, and please feel free to reach out if you have any questions about your loan!

Have questions? Reply to this email or contact us @ support@ledn.io