Cryptocurrency has been continually disrupting the financial industry since its inception over 12 years ago. Now, this shape-shifting sector looks to be doing the same to conventional lending via the advent of cryptocurrency loans, which offer a range of advantages for both borrowers and lenders.
As well as being quicker and more efficient than applying for a loan through a bank or other financial institution, crypto loans are also safer, more accessible and offer greater flexibility than their fiat counterparts – while they’re fairer for all parties involved, too. Here’s a closer look at those benefits in more detail.
What you'll learn 👉
Speed
Applying for a loan through a bank typically takes a number of days to receive approval and that waiting period can even stretch into weeks for more complex cases. Crypto loans, on the other hand, are almost always processed within 24 hours, while the simplest transactions can be completed inside a matter of minutes! For someone who needs cash post-haste, that’s a huge draw.
Efficiency
As well as approving transactions at a rapid pace, the Blockchain technology which underpins all crypto loans is also capable of moving funds almost instantaneously and with no need for physical records to be created. This is incredibly efficient in comparison to traditional lending, since time, energy and resources (like paper) do not go to waste needlessly.
Security
The same blockchains which were mentioned above are also excellent for bolstering the security of crypto loans. That’s because each block in a single chain is connected cryptographically, which means it’s protected against malicious hackers via state-of-the-art cyber security. Indeed, the funds involved in crypto loans are considerably more secure than those used by certain other payment systems that are already widely used by the general public.
Accessibility
To gain approval for a standard bank loan today, a borrower must fill out a cumbersome application, provide several forms of identification and pass a thorough credit check – not to mention actually own a bank account. For the 1.7 billion people in the world without one, that can pose a sizable problem. Crypto loans circumvent accessibility issues by only requiring borrowers to prove their identity and put up the appropriate collateral to secure the loan. Simple!
Flexibility
When applying for a bank loan, borrowers have very little say in the finer points of the contract they are entering into. Because banks hold all the cards, they can dictate the terms and conditions of the arrangement – which inevitably favor them. Crypto loans, on the other hand, put the borrower in the driving seat by allowing them to specify the amount they wish to borrow, the repayment period and many other details.
Equality
Finally, crypto loans are a far more equitable system of borrowing and lending finance than via conventional systems. Whereas a bank invariably takes a substantial portion of the profits from the interest incurred on a loan, crypto loans dispense with their services as a middleman and instead give the borrower the vast majority (if not all) of their earnings. That means it’s fairer for both borrowers and lenders than traditional financial arrangements.
Crypto lending carries with it a number of advantages which, as the practice becomes more accepted and commonplace among public consumers, are likely to make it an increasingly attractive proposition in their eyes.
Image by WorldSpectrum from Pixabay
