Source https://medium.com/coinscapture/what-is-cryptocurrency-lending-5442339d19cc
Trying your luck hard in the economy of Cryptocurrency trading, but still not satisfied with the returns? Here is an easy way of earning higher returns from your cryptocurrency holdings through “Cryptocurrency Lending”. This lending is as same as physical currency lending, the only difference is you get huge returns as compared to traditional banks. There are two types of Cryptocurrency Lending namely- Margin Lending and Peer-to-Peer Lending. Let’s understand each one of them step by step.
Please note: This article is for informational purposes only and not for financial advice.
What is Margin Lending?
Margin lending allows individuals to get cryptocurrency loan against their holdings, which are used as a security for the loan.
How does Margin Lending work?
Margin lending can be enabled by lending cryptocurrency on a lending exchange on which the lender makes his cryptocurrency holdings available for lent with his own interest rate. Such lending involves the borrower’s belief that the price of a coin may increase, based on this, he will request funds from the exchange. If your loan has the lowest rate of interest, the borrower will borrow from you. Once the specified loan period is over, the borrowed cryptocurrency is returned along with the interest amount.
Safety Measures for Margin Lending
What if the borrower had a hard time or the price of crypto goes down? Will the lent cryptocurrency be lost? To minimize such valid risks; exchange acts as safeguards and implements some terms for safety, such as the borrower is required to hold some % of his own cryptocurrency as collateral with the loan. If there is a situation that the cryptocurrency price does down, a margin call is rung and the borrower is requested/recommended to return the borrowed funds along with the interest rate.
Note: It is highly recommended to read and understand the terms and conditions of the exchange you lend on.
Poloniex, Bitfinex, Liqui, Quoine, and Coincheck are some examples of the lending platform each having its own terms and conditions, please go through them carefully.
What is Peer-to-Peer (P2P) Lending?
Peer-to-Peer (P2P) lending is person-to-person lending enabled on a website that allows individuals to get loans directly from investors and thereby cutting down the financial institution in between.
How does P2P lending work?
P2P lending is enabled on an online marketplace that matches borrowers and private investors directly. In this, the private investor is a lender providing a loan and the borrower has to pay back the borrowed cryptocurrency. The rate of interest is decided by the site depending on the creditworthiness of the applicant also all the money transfer and monthly payment are done through it. The matching is generally automated and done as follows:
The investor opens an account on the site and deposits the available amount of lending
The borrower completes an online loan application
The lending site determines the creditworthiness of the borrower through a credit check and assigns the interest rate
The investor offers a loan that may be accepted or rejected.
If the loan offer is accepted, the borrowed cryptocurrency has to be returned with interest within the specified period of maturity. If paid late, a late fee is charged
Some major organization also charges an additional fee depending on the loan amount.
Upstart, StreetShares, Prosper Marketplace, CircleBack lending, and the Lending club are some example of P2P lending platform each having its own terms and conditions, please go through them carefully.
Conclusion:
This was all about cryptocurrency lending. Before you decide to dive in, it is highly recommended to do your homework and invest carefully and consciously.
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Trying your luck hard in the economy of Cryptocurrency trading, but still not satisfied with the returns? Here is an easy way of earning higher returns from your cryptocurrency holdings through “Cryptocurrency Lending”. This lending is as same as physical currency lending, the only difference is you get huge returns as compared to traditional banks. There are two types of Cryptocurrency Lending namely- Margin Lending and Peer-to-Peer Lending. Let’s understand each one of them step by step.
Please note: This article is for informational purposes only and not for financial advice.
What is Margin Lending?
Margin lending allows individuals to get cryptocurrency loan against their holdings, which are used as a security for the loan.
How does Margin Lending work?
Margin lending can be enabled by lending cryptocurrency on a lending exchange on which the lender makes his cryptocurrency holdings available for lent with his own interest rate. Such lending involves the borrower’s belief that the price of a coin may increase, based on this, he will request funds from the exchange. If your loan has the lowest rate of interest, the borrower will borrow from you. Once the specified loan period is over, the borrowed cryptocurrency is returned along with the interest amount.
Safety Measures for Margin Lending
What if the borrower had a hard time or the price of crypto goes down? Will the lent cryptocurrency be lost? To minimize such valid risks; exchange acts as safeguards and implements some terms for safety, such as the borrower is required to hold some % of his own cryptocurrency as collateral with the loan. If there is a situation that the cryptocurrency price does down, a margin call is rung and the borrower is requested/recommended to return the borrowed funds along with the interest rate.
Note: It is highly recommended to read and understand the terms and conditions of the exchange you lend on.
Poloniex, Bitfinex, Liqui, Quoine, and Coincheck are some examples of the lending platform each having its own terms and conditions, please go through them carefully.
What is Peer-to-Peer (P2P) Lending?
Peer-to-Peer (P2P) lending is person-to-person lending enabled on a website that allows individuals to get loans directly from investors and thereby cutting down the financial institution in between.
How does P2P lending work?
P2P lending is enabled on an online marketplace that matches borrowers and private investors directly. In this, the private investor is a lender providing a loan and the borrower has to pay back the borrowed cryptocurrency. The rate of interest is decided by the site depending on the creditworthiness of the applicant also all the money transfer and monthly payment are done through it. The matching is generally automated and done as follows:
The investor opens an account on the site and deposits the available amount of lending
The borrower completes an online loan application
The lending site determines the creditworthiness of the borrower through a credit check and assigns the interest rate
The investor offers a loan that may be accepted or rejected.
If the loan offer is accepted, the borrowed cryptocurrency has to be returned with interest within the specified period of maturity. If paid late, a late fee is charged
Some major organization also charges an additional fee depending on the loan amount.
Upstart, StreetShares, Prosper Marketplace, CircleBack lending, and the Lending club are some example of P2P lending platform each having its own terms and conditions, please go through them carefully.
Conclusion:
This was all about cryptocurrency lending. Before you decide to dive in, it is highly recommended to do your homework and invest carefully and consciously.
https://www.reddit.com/user/coinscapturecom/comments/buq7of/what_is_cryptocurrency_lending/
http://sco.lt/6h8u4O
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