A Quick Guide to Defi Lending

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In the past ten years, cryptocurrency has been all over the media. This digital type of money is not only used as a means of storing wealth, similar to gold, for instance. In fact, more and more individuals and businesses adopt the use of cryptocurrency as a means of exchange. Next, let’s see what defi lending is and how it works.

What Is a Crypto Loans Platform?

A crypto loans platform is typically a website where you can fill in your desired loan amount, the term you’d like to choose to repay the loan, then select your collateral which is, in this case, cryptocurrency. Essentially, a crypto loans platform is similar to the services provided by your own bank. 

The main difference is that you use your own cryptocurrency (from your personal wallet) as collateral, while banks usually ask for your home or car as collateral. Just like a traditional loan, you will receive your collateral back after you pay off the entire loan.  

A crypto loan platform typically works in two ways: first, if you need cash, you can use your cryptocurrency as collateral to obtain access to cash. You will have to pay a fixed interest rate over the chosen term of the loan. Secondly, a crypto loans platform is also for people who want to earn money. In other words, you can provide cash for borrowers, and you will earn interest on fiat money. 

How Does Defi Lending Work?

Defi stands for “decentralized finance,” and it refers to a series of processes that allow you to access finances without intermediaries, third parties, or other institutions. It uses blockchain technology to ensure the transparency and safety of every transaction. 

Since there is no third party involved in defi lending, the process is straightforward, you don’t need to cover any additional costs, or go through time-intensive paperwork. Also, you don’t need to provide a credit score check or go through any of the traditional processes for obtaining a loan. 

Many crypto loans platforms, such as SmartCredit.io, also offer more advantageous loan terms compared to traditional lending. For instance, their interest rate is fixed, so you know exactly how much you will be paying back if you are a borrower or how much you earn if you are a lender, unlike a traditional loan with a variable interest rate that changes based on market conditions. 

Defi lending is ideal for people who need quick access to cash without selling their crypto assets. Even more important, you gain instant access to your cash funds, unlike traditional banking that may require several business days to release the funds to you. 

Summary

In short, crypto loans platforms allow you to access defi lending, which means that you can use your cryptocurrency as collateral to obtain access to quick cash. You can choose your own term and amount while having a fixed interest rate. Defi lending is a surefire way for crypto owners to obtain liquidity without going through the hurdles of traditional banking in a transparent, safe environment based on blockchain technology. 

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CaptainAltcoin's writers and guest post authors may or may not have a vested interest in any of the mentioned projects and businesses. None of the content on CaptainAltcoin is investment advice nor is it a replacement for advice from a certified financial planner. The views expressed in this article are those of the author and do not necessarily reflect the official policy or position of CaptainAltcoin.com

Philipp Traugott

Philipp Traugott

Phil Traugott is a staff writer at CaptainAltcoin. As a trained marketing specialist for copywriting and creative campaigns, he has been advising top companies on the following topics: online marketing, SEO and software branding for more than 10 years. The topic of crypto currencies is becoming increasingly important for companies and investors and he found it very alluring and fitting for his skillset which prompted him to pivot his career towards blockchain and cryptocurrencies.

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