Which is better: bitcoin loan or bank loan?
Currently, the development trend of Bitcoin is not only to reap profits from the purchase and sale of digital assets, but there are also Bitcoin lending services and other cryptocurrency assets that are used as collateral to obtain funds in the form of stablecoins such as USDT, DAI, etc. .
Cryptocurrency loans that are now present are widely used by investors to simply obtain credit funds or to provide loans to blockchain projects that are being worked on. The advantage of lending bitcoins on the DeFi platform is the percentage you get from the interest on the loan, which reaches more than 4% per year.
For borrowers who provide collateral for cryptocurrencies such as bitcoin (BTC), ethereum (ETH) and so on, you can quickly and easily apply for a loan on the DeFi platform. Of course, with a minimum nominal loan request in accordance with the provisions of each platform.
This cryptocurrency loan has advantages in terms of submission, which is only enough to have digital assets, while the process does not have to go through a bank check to find out the credit score.
Bank vs. Cryptocurrency Loans
The process of applying for a cryptocurrency loan on the DeFi lending platform is like applying for a credit loan through fintech services, P2P loans or loans (online loans). You just have to agree to the various terms and conditions that apply.
When you apply for a loan at a bank, you may have a lot of problems with the administrative requirements, which are quite demanding. Of course, not everyone has access to credit services at the bank, but only some people can apply for a loan. However, loans on the DeFi lending platform are not like that, you just need to download or use the cryptocurrency loan application, register and then choose your needs to lend or borrow on the platform.
The borrowing process on the DeFi platform only takes one minute, this process is much faster than through a bank, which can take days.
Another benefit of taking out a cryptocurrency loan is that you can use the stablecoins you earn to buy other crypto assets through crypto exchanges that are used for crypto-to-crypto trading. You can then use the profits from these digital assets to pay off your credit.
However, borrowers also need to be careful if the cryptocurrency assets that are used as collateral for repayment experience a drop in price, causing the collateral to also decrease in value upon payment.
In addition, borrowers can also provide collateral in the form of fiat currency to obtain bitcoin loans and other digital assets. The advantage of providing collateral in the form of fiat currency is that you can benefit from the Bitcoin that is owned by increasing the price in the market.
DeFi Lending Platform A Blessing for Donors and Borrowers
The main task of investors is to find as many investment opportunities as possible. The profits you get from the investment vehicle can therefore be reinvested in other types of investment vehicles.
One way to make money work for you is to use your idle funds to invest in investment vehicles that offer exciting returns.
The presence of DeFi is now good news for all cryptocurrency asset owners around the world to further maximize the money that can be raised through funding on the DeFi lending platform.
As the owner of Bitcoin et al. you can put your funds into a DeFi project in the works to get a return on the loan you gave. You can compare it to placing your funds in a bank deposit for a certain period of time with a relatively high rate of return.
In the midst of the pandemic, the deposit interest offered in Indonesia is only around 4% per year due to Bank Indonesia's policy to lower deposit interest rates. However, if you invest your digital assets in various DeFi projects, you can potentially earn up to 8% annual returns.
What about the borrower? Borrowers can use borrowed funds in the form of stablecoins and acquired cryptocurrencies to purchase collateralized digital assets such as Bitcoin (BTC) and Ethereum (ETH), a method that is very effective when prices are bullish. So the increase in the price of Bitcoin (BTC) and Ethereum (ETH) that has become collateral can cover the loan interest that you have to pay.
The mechanism of Bitcoin lending is generally different from other loans because the fiat currency or digital asset that is used as collateral has a higher value than the amount of the loan you can get. If during the loan period
it is safe, whenever the price of the guarantee provided decreases below the loan you received, then the guaranteed digital asset will be subject to liquidation and the loan will be closed after interest and penalties are charged to the user. So Bitcoin loans with this guarantee are secured loans, as you usually find when applying for mortgages and KKB.
For this, before applying for a Bitcoin loan on a DeFi lending platform, you must first understand the current market conditions, if you are in a bearish trend, you should pledge your stablecoin and get a volatile cryptocurrency loan.
Meanwhile, during a bullish trend, it is better to pledge a volatile digital asset and get a stablecoin loan. This strategy is widely adopted by investors as the cryptocurrency investment trend of 2020.