Why Should You Borrow From Binance Loans?
Why Should You Borrow From Binance Loans?
Have you ever had a desperate need to borrow or loan funds in order to cater for a dire need? Everyone has!
Have you been in a compromising scenario that required lending funds to settle your needs and it got frustratingly challenging to find someone or a platform ready to lend you funds with realistic or feasible conditions?
If you have, be rest assured that you are not the only one who has faced such a distressing crisis; this article is just for you, because I will be sharing a personally researched guide that will definitely be a source of relief to you when next you find yourself in such a fix.
This article discusses where to borrow loans, factors to consider when borrowing loans, why you should borrow from Binance Loans and how to do it.
Please note that the content of this article represents a personal guide and should not be viewed as financial advice.
Many resort to borrowing loans from Financial institutions like Banks, but their huge interest rates is a sure turnoff; and that is the main reason many crypto enthusiasts like me turn to borrowing from Binance Loans.
Binance Crypto loan is a financial service that helps Binance users to meet their short-term liquidity needs by providing them with crypto loans ranging from $100 to $10,000.
In crypto space just like in the banking sector where loans are borrowed with interests, Crypto enthusiasts, Crypto traders, NFT collectors, and P2P merchants turn to Decentralized Finance (DeFi) and Centralized Exchanges (CEX) like Binance to borrow crypto loans with interest.
When it comes to borrowing crypto loans however, there are some challenges and factors that need to be considered; they include interest rates, loan to value (LTV) and liquidation fears. Let’s consider them before we then focus on why you should borrow from Binance Loans and how to do it.
Factors to consider when borrowing Crypto Loans.
Loan-to-Value (LTV) Ratio
LVT Ratio is a calculation that tells investors the actual value of their loan as compared to the value of their collateral. This ratio measures risk level by comparing the value of your loan against the market value of its collateral.
LTV is calculated using the index price, which is not the same between coins. Thus, if any two coins were used as collateral of equal value, the LTV would definitely differ between the collateral options.
Liquidation Fears
Liquidation occurs when a borrower does not repay their loan, even after they are given an extra amount of time from the original due date. If the principal cannot be met, the original collateral is liquidated to cover the loan. So in easier terms, if the value of your collateral falls below the requirements, you’ll need to add more liquidity; otherwise, your lender runs the risk of liquidation.
A liquidation fee is also incurred from the total borrowed amount.
Loan Repayment Delay
If repayment of the borrowed loans is delayed beyond the expected time to repay, Borrowers will get liquidated for late repayments and incur a liquidation fee. On Binance Loan, the fee is 2% of the total borrowed amount.
Let us now focus on several reasons why you should consider borrowing from Binance Loans.
At this point, let me share from personal experience, why I recently borrowed from Binance Loan.
A few days ago, the price of Bitcoin was rapidly dipping and fell below $21,000 and some altcoins in my watchlist like BNB became as low as $198 which signalled a buying opportunity but I was low on funds at that moment; however, I had hope for funds at a later date as I was expecting payment for a job the upper week.
How could I let this opportunity go- I thought; and boom 💥💥, I remember I could easily secure a Binance Crypto Loan using the 2 ETH I was HODLing in my portfolio which was worth over $2400 as collateral.
Quickly, I proceeded to initiate a loan order of $1,000 using my 2 ETH as collateral, since Binance Loans allows you to borrow up to 65% of your collateral value.
I was so happy because the loan helped me secure 5 BNB which as at the time of writing this article is worth over $1,130- a $130 profit which is expected to ultimately increase within the coming months, hence it was a good trading opportunity.
I intend to repay the loan before 30days; even though the borrowed loan is accruing an hourly interest that will generate approximately $8 in 30days, it is still incomparably minute to the current profit generated.
What other reasons should you ditch other crypto loan platforms for Binance Loans?
I have carefully outlined some major reasons below;
Repayment Period is Flexible:
Binance Loans provides 7, 14, 30, 90 and 180-day loan repayment terms. As noted in my experience mentioned above; Interest is calculated on the borrowed amount based on an hourly time frame.
No Embargo on where to use Borrowed Funds:
As long as you have borrowed with a collateral and agreed on a repayment term, Binance Loans allows you full power to use the funds anywhere. Like in my case, I iterated earlier, I used it to trade on the platform, but note that you are free to withdraw it, if you choose to use your funds outside Binance. You can also use your borrowed crypto anywhere on the Binance ecosystem.
To illustrate this point:
Coral, a college student, needs $75 to clear some utility bills. He is broke without any reserve funds. He looks into his portfolio to take out some profits to clear-off his bills but the crypto market is down and he is at a loss.
Coral can borrow a loan from Binance to clear his bills and deposit his "crypto in loss" as collateral; hence he can withdraw the borrowed loan, convert into local fiat currency via P2P and settle his overdue utility bills.
Interest Charges is based on Loan Duration:
Binance Loan only charges interest fee based on hours borrowed, not on the loan payment term. This means that once you repay the borrowed loan anytime before the due date, there are no penalty fees, and the accrued hourly interest on the borrowed amount will be calculated based on the time the loan is repaid.(that is; from loan borrow time to loan repay time, not agreed loan repay term)
To illustrate this;
Take For example; Austin who used his 1 BNB worth $200 borrowed 100 BUSD worth $100, he is expected to pay back 0.26765792 BNB or 107.20144 BUSD since he selected a repayment term of 180days.
Collateral used for Loan is staked:
Some of the collateral options Binance allows are stakeable. So when you borrow loans and use a stakeable collateral, it will be staked on the platform to generate crypto rewards which can simultaneously reduce the loan interest fees.
To illustrate this:
Coral, who we mentioned earlier, borrowed a loan of $75 to clear his utility bills, using a “crypto-in-loss" as collateral. The crypto in loss he used was 0.4 BTC he had been gifted by his Dad.
BTC is stakeable and so he is entitled to staking rewards which is an accrued daily interest on his BTC. The accumulated interests can help to reduce or may even offset the accrued hourly interest generated from his borrowed loan.
Borrowing is easily accessible and fast Compared to the financial banking sector or Loan sharks, Binance Loans are more accessible to underbanked populations, including people with little to no credit history, limited access to traditional institutions and self-employed workers who can not meet some unrealistic conventional loan requirements. The process to borrow is instant and as fast as placing a trade on the market.
There are generally many benefits of crypto loans and the main ones that stand out are;
Crypto loans can be used to save leverage trades close to liquidation, that require to add more margin to the open positions; pay off utility bills or cater for urgent needs or debts pending when you can make a repayment within the loan repayment period, which can range from 7 to 180 days depending on the selected loan period agreement.
Crypto loans can also serve as a funding remedy to traders who are hodlers of crypto projects that do not want to sell, but desire to trade in order to yield turnovers; It can also provide an alternative source of funds to traders with limited funds wanting to add to their trading funds while using their HODLed crypto as collateral.
Conclusively, let us take a look at how you can borrow crypto loans from Binance.
Remember Austin’s story?
He used his 1 BNB worth $200 to borrow 100 BUSD worth $100.
Austin has 1 BNB in his portfolio valued at $200 because the market is down and the value of BNB has dropped. Austin decides that he can't sell at a loss since he bought BNB at $400. He opts to use a Crypto Loan.
How can he use his Binance APP to access the Crypto Loan?
Austin navigates his Binance App; he goes to the Binance APP Home window and clicks to use the Earn service and selects Crypto Loans.
Next, he uses the default option Borrow as shown in the image above.
He types 100 BUSD in the I want to Borrow column. Next, he selects BNB in the Collateral Amount; and it auto calculates, he will pay 0.26765792 BNB as shown in the picture.
Austin already has 1 BNB in his portfolio, so that will cover the collateral Amount. Austin then selects 180 days as Loan Term Period as his preferred payback period, even though he intends to repay before the next 180 days.
Finally Austin confirms and completes the loan process.
What will Austin pay as the interest?
As highlighted from Austin's Story here are the detailed steps to borrow in bulleted points:
Note that Austin already has a Binance account; if you do not have once, quickly open one using this link: https://www.binance.me/en/activity/referral/offers/claim?ref=CPA_00IL5CXB21
If you’ve registered for a Binance account and completed identity verification, you’re ready to start borrowing on Binance Loans.
Follow the instructions below to borrowing and repaying your first Binance Loan.
How to borrow:
The first thing to do is to decide which asset you want to borrow and which asset you have in your portfolios that you’ll use as collateral. You can choose from a vast selection of popular cryptocurrencies like BTC, ETH, BUSD and more,
Use this direct link: Crypto Loans| Borrow and Lend Cryptos instantly | Binance
Go to Home,
Click Finance (on Desktop) or Earn (on the App)
Click Finance on Desktop or Earn on App
Click Crypto Loans (Borrow),
Select the asset you want to borrow and enter the amount,
Select the collateral asset and enter the collateral amount,
Choose a loan term from a 7 to 180 days time frame, and it will automatically determine the hourly interest rate based on your collateral amount.
Next confirm the borrowable amount, collateral, interest, repayment, and click Start Borrowing Now,
Confirm all the information on the order confirmation pop-up that comes up,
Carefully read and agree to the Binance Loans service agreement and click Confirm,
Once it is confirmed, the collateral is transferred into the Loan account and the loan amount is received into the spot account.
Remember you can use your loan in or outside the Binance Ecosystem.
How to repay:
Repay your loan via the Binance Loan Order Page; also note that you’ll pay the interest fee first and then the principal amount.
To start use this direct link: https://www.binance.com/en/loan?ref=122131113 or
Go to Home,
Click Finance (on Desktop) or Earn (on the App),
Click Crypto Loans (Ongoing Loans),
Click Repay or Repay with collateral if you wish to repay loan with collateral,
Enter the repayment amount or select a repayment ratio,
Review the details to be correct and click confirm Repayment,
A repayment successfully processed confirmation message pops up.
It is always best to repay early because interest will be charged according to how long you borrowed (hours) and you will not be charged any fee as a penalty for repaying early.
Binance Crypto loans can be repaid at any time before the expiration of the loan period or at the loan expiration period or within the 72 hours grace period after the expiration period. Once the loan is repaid, the collateral is received back into the spot account.
Final Thoughts:
Obviously the benefits of borrowing crypto loans outweigh the worrisome factors and you should consider using crypto loans more often when in a distressing scenario like the ones painted at the outset of this article.
Remember, it is the simple, fastest and easiest way to borrow extra funds. There is no need for a credit score, the interest fees are petít (very small); and you can borrow up to 65% of your collateral value.
Bear in Mind, the crypto market is volatile, and loans come with their own set of risks that require a forethought before making a decision to borrow a loan.
Always Ensure you monitor the LTV, liquidation, and HODL a valuable crypto in your portfolio to cover the interest fees, collateral and principal repayment.
Consider trying out Binance Loan today!
For more info on Binance Loans visit the
FAQ-What Is Binance Loans and Frequently Asked Questions | Crypto Loans
Binance Blog - Should You Borrow Against crypto: Pros and Cons
Loans: How to Borrow Cryptocurrencies?
Support- How to use Binance Loans?
What are Binance Loans?
Academy- Interest Rates Explained
Resources