Ethereum loans offer rapid access to funds, bypass conventional credit checks, and provide flexibility in repayment options.
ETH-backed loans are a way to access liquidity while retaining your assets. In 2025, crypto lending is faster, more secure, and widely available. This guide breaks down the essentials - key terms, risks, and a step-by-step process - so you can borrow against your Ethereum with confidence.
Read more: The Ultimate Guide To Crypto Lending - Everything You Need To Know
Why Get a Loan on Ethereum?
ETH-backed loans allow you to access funds while retaining ownership of your assets. Here’s why they are an attractive option in 2025:
Liquidity Without Selling
Borrowing against your Ethereum holdings instead of selling them allows you to maintain exposure to potential price growth.
Fast and Flexible Access
Crypto lending platforms provide quicker funding compared to traditional loans, ideal for urgent liquidity needs or time-sensitive investments.
Make the Most of Market Opportunities
Using borrowed funds to invest in other ventures, stake assets, or trade during market dips, can maximise your portfolio’s potential.
Favourable Market Conditions
Events like the approval of spot ETH ETFs and lower interest rates in 2024 have increased ether’s market liquidity and appeal, making it a strong asset for collateral.
No Credit Checks
ETH-backed loans rely on collateral, not credit history, making them accessible to a broader range of borrowers.
Key Terms You Should Know Before Applying For an ETH-backed Loan
ETH-backed loans work by allowing you to borrow money using your ETH as collateral, without the need to sell your digital assets.
Here's a breakdown of the key terms you’ll come across:
Ethereum vs. ETH (ETH)
Ethereum is a blockchain platform. ETH (ETH) is the cryptocurrency that is used on the Ethereum blockchain. For example, to purchase an NFT on the Ethereum blockchain you need ether. To take out a loan on Ethereum, you must use ETH as collateral.
Collateralization
You deposit ETH into a lending platform as collateral. This is a security measure for the lender in case of non-repayment.
Loan Disbursement
Based on the value of your deposited ETH, the platform then offers you a loan in fiat currency or another cryptocurrency. The loan amount is typically a percentage of ETH’s market value, known as the Loan-to-Value (LTV) ratio.
Interest and Repayment
You agree to pay back the loan plus interest over a specified period. The interest rates and repayment terms can vary widely between platforms.
Flexibility and Accessibility
This process bypasses traditional credit checks, making funds more accessible quickly. It also allows you to retain ownership of your ETH, hoping its value will increase over time.
Liquidity Without Selling
By taking out a loan against your ETH, you gain liquidity (access to funds) without having to sell your assets. This can be particularly advantageous if you expect the value of ETH to rise or if you want to avoid taxable events that selling might trigger.
Risks and Margin Calls
If the value of ETH drops significantly, you may face a margin call, requiring you to add more collateral or repay part of the loan to maintain the LTV ratio. Failure to meet margin calls can result in the liquidation of your collateral to cover the loan.
Read more: How to Borrow Against Crypto - Decoding Crypto Loans
DeFi vs. CeFI: Which is best?
DeFi platforms prioritise speed and anonymity but come with risks such as variable rates, lack of regulation, and minimal support. CeFi platforms, on the other hand, offer greater legal security, predictability, and support, but require compliance with regulatory procedures like KYC and AML.
Borrowing with DeFi Platforms
Variable Interest Rates
DeFi platforms typically offer variable interest rates, making it difficult to predict your costs over a long period. This unpredictability makes DeFi loans less suitable for long-term financial planning, such as buying a home.
No KYC or AML
DeFi platforms generally do not require Know Your Customer (KYC) or Anti-Money Laundering (AML) checks. While this allows for quick loan approvals, it also means the platforms are unregulated. If something goes wrong, there’s no governing body or customer support to assist.
Lack of Support
Since DeFi platforms operate without centralised customer service, there’s no entity to help with tax documentation or questions. Borrowers must manage all tax-related matters independently.
Borrowing with CeFi Platforms
Regulated Environment
CeFi platforms, like Ledn, require KYC and AML checks, which may add steps to the process but ensure the platform operates within regulatory frameworks. This regulation provides a layer of protection, as borrowers can rely on legal contracts and, if needed, escalate issues to a regulator.
Support for Tax Filings
CeFi platforms provide documentation like loan agreements and statements, making it easier to file taxes or report financial positions. They also offer customer support to address questions or concerns.
9 Steps To Secure Your Loan on Ethereum
Step 1: Assess your financial circumstances
Before securing a loan on Ethereum, assess your financial situation and understand the associated risks. Familiarize yourself with loan terms, collateral requirements, and alternative financing options.
Step 2: Create an Account
Choose a platform and sign up for an account. You'll need to provide some basic information, such as your email address and a secure password. Follow the prompts to complete the account creation process, including verifying your email address to ensure the security of your account.
Step 3: Complete KYC Verification
To comply with regulatory requirements and enhance the security of the platform, Ledn requires users to complete a Know Your Customer (KYC) verification process. This step involves submitting identification documents, such as a government-issued ID or passport and a proof of address. Follow the instructions on the platform to upload your documents and complete the verification process.
Step 4: Apply for an ETH-backed Loan
Once your Ledn account is set up and verified, navigate to the loan application section on the Ledn platform. You can Ledn’s calculator to input the loan amount and determine how much ETH collateral you need to secure your loan. Then, provide the bank details where you want the loaned funds to be sent to. ETH Dollar loans at Ledn can also be funded in your local currency or USDC. This varies on other platforms.
Step 5: Review and Accept Loan Terms
Before finalizing your loan application, carefully review the loan terms, including the interest rate, loan duration, and the loan-to-value (LTV) ratio. The LTV ratio determines how much you can borrow against your collateral. Ensure that you understand and agree with all the terms before accepting them.
Step 6: Deposit Collateral
Once you've accepted the loan terms, you'll be prompted to deposit the agreed-upon amount of ETH as collateral. Follow the instructions provided by the platform to transfer your collateral from your Transaction account or external wallet to the designated collateral wallet address.
Step 7: Receive Your Loan
After your collateral has been successfully deposited and confirmed on the blockchain, the platform will disburse the loan amount to your bank account or USDC address. The time it takes for the funds to become available can vary, so check the platform's guidelines for specific timing details.
Step 8: Repay the Loan
Ensure that you adhere to this schedule to avoid penalties or the risk of losing your collateral.
Step 9: Reclaim Your Collateral
Once your loan is fully repaid, including any interest and fees, your collateral will be unlocked and returned to your ETH Transaction account.
Read more: Compare Ethereum Loan Rates in 2025
Is an ETH-backed Loan Right For You?
ETH-backed loans are ideal for individuals and businesses looking for quick access to funds, willing to leverage digital assets, and comfortable with the risks of cryptocurrency volatility.
They're particularly suited to those who prefer the flexibility and efficiency of crypto lending solutions over traditional banking.
Read more: Is Ethereum Safe? Everything You Need To Know
Why take out an Ethereum loan with Ledn?
By choosing Ledn for an ETH-backed loan, you're joining a platform that prioritizes your security, ease and financial growth.
Here are some reasons to consider Ledn for an Ethereum loan:
1. Security and Trust
Ledn offers flexible collateral management options, including Custodied Loans, which restrict collateral rehypothecation to mitigate associated risks.
Ledn publishes its Proof of Reserves and monthly Open Book Reports, so clients know how loan collateral is being used.
2. Competitive Interest Rates
One of the key benefits of choosing Ledn is their competitive yet realistic interest rates. This can make a significant difference in the cost of borrowing, especially for those looking to leverage their ETH holdings over time.
3. Transparency
Ledn has straightforward and transparent loan terms. This transparency includes clear information about loan-to-value (LTV) ratios, interest rates, repayment terms, and any associated fees. Such openness helps borrowers to make informed decisions without hidden surprises.
4. Quick Access to Funds
Clients can expect loan disbursements within 24 hours after collateral confirmation, offering rapid access to funds. Ledn's services are available in over 120 countries.
5. Flexible Loan Options
Ledn provides different loan collateral management options to suit different needs.
This ensures borrowers can find a loan product that matches their specific loan management requirements.
Ledn clients can choose between our Standard loans, which rehypothecate loan collateral in order to lower interest rates for clients, and Custodied loans where loan collateral is only being posted to an institutional USD funding partner, typically a bank or credit fund, and cannot be further rehypothecated to generate interest.
Custodied Loans are ring-fenced from the credit risks associated with rehypothecation activities related to Standard Loans and Ledn Growth accounts.
Read more: Rehypothecation in Crypto Lending - A Simple Guide
6. No Credit Checks
Like many platforms in the decentralized finance space, Ledn typically does not require traditional credit checks. This might be useful for individuals who have strong digital asset holdings but do not have a high credit score or prefer not to impact their credit through inquiry.
7. Customer Support
Ledn’s customer support team is on hand to address any questions or concerns borrowers may have at any time during the loan period.
8. Reputation in the Crypto Community
Ledn has established itself as a reputable player in the cryptocurrency lending space. Check out their positive reviews and testimonials from users.
Conclusion
In nine simple steps, you can secure a loan with your ether, unlocking the potential of crypto lending solutions. By following Ledn’s streamlined process, you'll gain quick access to funds and the flexibility to leverage your digital assets.
Remember, while ETH-backed loans offer significant advantages, always consider your financial stability and conduct thorough research to make informed decisions.
Get started with an Ethereum loan at Ledn.
Sponsored by 21 Technologies Inc. and its affiliates (“Ledn”). All reviews and opinions expressed are based on my personal views.
