Want to get started with a cryptocurrency loan? In this blog, we’ll walk through 10 of the best crypto loan platforms in 2024— as well as the pros and cons of each option!
Quick Look: The 10 Best Crypto Loan Platforms
- Aave: Best for flash loans
- Alchemix: Best for self-repaying loans
- Bake: Best for instant loan approvals
- Binance: Best for non-US customers
- Compound: Best for no minimum loan requirements
- Crypto.com: Best for CRO stakers
- Unchained: Best for high net worth individuals
- Wirex: Best for no deadline repayments
- YouHodler: Best for high LTVs
Aave
Best for flash loans
Aave is one of the world’s most popular decentralized finance (DeFi) protocols. Aave is built on the Ethereum blockchain and offers low-interest rates and features like flash loans.
Pros:
- Aave is one of the oldest and most trusted platforms in DeFi
- Low-interest loans
- Flash loans available to take advantage of arbitrage opportunities!
- Support for Ethereum, Avalanche, Harmony, and Arbitrum.
Cons:
- Users must actively watch and manage their positions to avoid liquidation.
- May be difficult to use if you’re new to DeFi.
Alchemix
Best for self-repaying loans
Alchemix offers a unique self-repaying loan! The platform stakes your collateral in protocols like Yield to generate returns. This return is then used to pay off your loan — so there’s no need for you to make manual repayments.
Pros:
- No need to make manual payments.
- No forced liquidations.
- Customize your loan and yield generation.
Cons:
- Risk of failure if one of the protocols that Alchemix uses to generate yield fails.
- Limited cryptocurrencies supported.
Bake
Best for instant loan approvals
Bake is a DeFi protocol famous for offering high interest rewards for stakers and low APRs for crypto loans.
Pros:
- Low APRs (starting from 0.5%)
- Trusted DeFi protocol that offers services like borrowing, staking, and Learn and Earn!
- Get approved for a loan instantly!
Cons:
- Limited to the Ethereum network.
- Relatively new and untested compared to other platforms.
Binance
Best for non-US customers
Binance is one of the world’s largest centralized exchanges. The platform offers a wide range of services — including cryptocurrency loans!
Pros:
- Wide range of supported assets — over 30 cryptocurrencies can be used as collateral!
- Competitive interest rates.
- Integrated with the Binance ecosystem.
Cons:
- Centralized platform risk
- Not available in the US.
Compound
Best for no minimum loan requirements
Compound is an Ethereum-based DeFi protocol that allows users to borrow assets and earn interest on deposits.
- One of the most trusted projects in DeFi
- Low interest rates on loans
- No minimum requirements for borrowing
Cons:
- Supports fewer assets than other platforms.
- Difficult to use for beginners
Crypto.com
Best for CRO stakers
Crypto.com is one of the world’s most well-known exchanges. In addition to its other services, the platform offers lending and borrowing services for users!
Pros:
- Wide range of supported cryptocurrencies.
- Integrated with the Crypto.com ecosystem.
- 8% interest rate available for users who stake more than 10,000 CRO.
- Take out a loan as low as $100!
Cons:
- Interest rates are higher for users who are not staking CRO.
- Crypto.com is a centralized platform. If you’re looking for a DeFi loan, it may not be the right option for you.
Summer.Fi
Best for flexible loans
Summer.Fi is a DeFi protocol that allows users to lend and borrow crypto-assets. The protocol — formerly known as Oasis.app — is part of the Maker ecosystem.
Pros:
- Low APRs starting from 1.37%
- Support for multiple different cryptocurrencies as collateral— including ETH and wBTC!
- No repayment deadline or minimum payments
Cons:
- Must monitor your position to prevent potential liquidations.
- Difficult to use for users new to crypto
Unchained
Best for high net worth individuals
Unchained is a centralized financial services provider that offers loans on Bitcoin!
Pros:
- Slick, user-friendly interface.
- Quality customer support.
- Unchained Capital does not invest your collateral. This limits the risk of platform failure.
Cons:
- Currently, Unchained Capital only supports Bitcoin.
- Unchained Capital has relatively high APRs (more than 16% at the time of writing).
- Unavailable in New York, Vermont, Massachusetts, North Dakota, South Dakota, New Mexico, and Idaho.
- More appropriate for high net worth investors. The minimum loan is $10,000.
Wirex
Best for no deadline repayments
Wirex is a UK-based platform founded in 2014. The platform offers loans using Bitcoin and Ethereum as collateral!
Pros:
- No strict deadline for paying back your loan.
- 24/7 customer support
- Funds protected by Fireblocks — a digital asset custody platform.
Cons:
- Limited cryptocurrency collateral options compared to other platforms
- Only stablecoins available to borrow
- Centralized platform risk
YouHodler
Best for high LTVs
YouHodler is a centralized platform that offers exchange services and crypto-backed loans. Currently, the platform is not available in the US.
Pros:
- High loan-to-value (LTV) ratios (90% of the loan value).
- User-friendly interface.
- Multiple supported assets — both crypto and fiat.
Cons:
- In 2019, YouHodler experienced a data breach — exposing data on millions of customers.
- Higher interest rates on certain loans.
- Not available in the US.
How do crypto loans work?
Crypto loans allow users to borrow fiat currency or other cryptocurrencies using their crypto holdings as collateral. The borrower agrees to pay back the loan with interest over a specified period, and once repaid, they regain access to their collateral.
However, if the value of your collateral falls under a certain loan-to-value ratio, it’s possible that your collateral will be liquidated.
Crypto loans offer advantages over traditional loans — most loan providers do not require a credit check. However, cryptocurrency’s volatility means there is greater risk of liquidation during a market downturn.
Types of crypto loans
There are two types of cryptocurrency loans: CeFi and DeFi.
- CeFi: Loans from centralized platforms like Binance.
- DeFi: Loans from decentralized protocols like Aave.
What is a CeFi loan?
In a CeFi loan, a centralized platform takes control of your collateral. This means that the lender holds the private keys to your crypto-assets.
In recent years, centralized lenders have faced criticism for mismanaging customer funds. 2022 saw multiple cryptocurrency lenders go bankrupt — including BlockFi, Voyager, and Celsius.
Centralized platforms do offer some advantages. Centralized platforms offer easy-to-use interfaces and customer support — which may make them a better option for beginner investors. However, users should be cognizant of the risks associated with centralized lenders.
What is a DeFi loan?
Decentralized protocols don’t require third-party platforms taking custody of your funds. Instead, you can take out a loan using a smart contract — allowing you to receive a loan without the need for an intermediary.
DeFi protocols don’t have the option to give users fiat currency. Instead, loans are paid out in stablecoin.
DeFi protocols are a great option for users who are wary of centralized platforms and who are looking for transparent lending options.
What’s the point of a crypto loan?
Many invesotrs take out crypto loans to avoid taxes. Because borrowing against your crypto as collateral isn’t a true disposal of your tokens, it also doesn’t trigger a capital gains tax event. This means that you can gain access to the value of your crypto without incurring capital gains taxes on any of your paper profits.
Other reasons for taking out a crypto loan include adding leverage to a trading position. For example, if you are bullish on the long term prospects of bitcoin, you could take out a loan against your existing bitcoin holdings and subsequently use the loan proceeds to buy more bitcoin. This “leverages up” your exposure to bitcoin price changes.
What are the risks of crypto loans?
Before you take out a crypto loan, it’s important to understand the potential risks.
- Volatility: The volatile nature of cryptocurrencies means collateral can quickly decrease in value, leading to potential liquidation.
- Smart Contract Vulnerabilities: DeFi protocols rely on smart contracts, which, if not coded correctly, can be exploited.
- Platform Risks: Centralized platforms can face issues like hacks, mismanagement, or regulatory challenges. In recent years, crypto loan providers like BlockFi have gone bankrupt.
- No FDIC Protection: Unlike US dollars, cryptocurrency is not protected by the FDIC. In the case of an exchange bankruptcy, you may lose access to your cryptocurrency.
Are crypto loans worth it?
Because of cryptocurrency’s volatility, it’s important to be cautious about the risks of potential liquidation. Because of this, many investors choose to take out crypto loans only in the event that they can pay them off in the near future.
Crypto loans without collateral
There are a few options for borrowing crypto loans without collateral.
Flash loans allow users to borrow cryptocurrency without collateral. Flash loans allow users to borrow cryptocurrency, make a profit on a transaction, and pay back the loan instantly. If you cannot pay back the loan instantly, the loan will not be approved.
Flash loans typically require advanced coding and smart contract knowledge and are typically recommended for experienced investors only.
While providers like Atlendis allow users to borrow loans without collateral, these are typically available for institutional investors only.
How to choose a crypto loan provider
Looking for a crypto loan provider? Here are some factors you should consider before taking out a loan.
Cryptocurrencies supported: You should do research to understand what cryptocurrencies your preferred platform supports.
LTVs: A platform’s LTV (Loan-to-value) ratio determines the size of the loan you can receive based on the value of your collateral. The higher the LTV, the more money you can receive in a loan.
APR: APR (annual percentage rate) is how much it costs annually to borrow money. The higher your APR, the more money you’ll be paying in interest fees.
Loan terms: Loan terms include details like the repayment period for your loan and your required minimum payment.
Reputation: Before you take out a loan, it’s important to look at third-party reviews and testimonials written about your loan platform.
Customer support: If you feel that you’ll need assistance during the loan process, you should choose a platform with quality customer support. Unfortunately, customer support is typically not available on DeFi protocols.
How are crypto loans taxed?
Generally, taking out a loan is not considered a taxable event. However, some transactions may come with tax implications.
Taking out a DeFi loan: Some DeFi protocols require users to trade one cryptocurrency for another to take out a loan. For example, taking out a loan on Ethereum or Compound requires you to exchange ETH for cETH. It’s possible that this will be considered a crypto-to-crypto trade subject to capital gains tax.
Forced liquidation: If your collateral is liquidated, you’ll incur a capital gain or loss depending on how the price of your collateral has changed since you originally received it. This is true even if you do not receive the proceeds of the liquidation.
Crypto interest deduction: If you use your loan for business or investment purposes, you may be able to deduct your interest fees on your taxes. This deduction is not available if you used the loan for personal purchases.
For more information, check out our guide to cryptocurrency loan taxes.
Crypto loan alternatives
Not comfortable using your cryptocurrency as collateral? Here are some alternatives you can consider if you’re in need of a loan.
Conventional loan: If you’re looking for a conventional loan, you can receive one from a bank or credit union. Typically, getting approved for a conventional loan is a lengthy process that involves a credit check.
Home equity loan:A home equity loan allows you to receive a loan using your home as collateral. However, if you default on your home equity loan, the lender can take your home.
Small personal loans: In need of a small loan? Apps like CashApp allow you to borrow between $20-200!
