Crypto Loans FAQ

A crypto loan lets you borrow cash (USD, EUR, or stablecoins) by using your cryptocurrency as collateral. You keep ownership of your crypto — if you repay the loan, you get it back. If the value of your collateral drops too far, the lender may liquidate (sell) it to cover the loan.

You deposit cryptocurrency as collateral with a lending platform. Based on the loan-to-value (LTV) ratio, you receive a loan in fiat or stablecoins. You pay interest on the loan and repay it over time. Once repaid in full, your collateral is returned. If your collateral value drops below a threshold, the platform may liquidate it.

LTV is the ratio of your loan amount to the value of your collateral. For example, if you deposit $10,000 in Bitcoin and borrow $5,000, your LTV is 50%. Lower LTV means less liquidation risk but less borrowing power. Most platforms offer 50-80% LTV.

If your collateral value drops and your LTV exceeds the platform's liquidation threshold, the platform may sell some or all of your collateral to repay the loan. This is called liquidation. Many platforms send margin call warnings before liquidating, giving you time to add more collateral or repay part of the loan.

CeFi (Centralized Finance) loans are offered by companies that custody your assets and handle the lending process. They typically require KYC and offer customer support. DeFi (Decentralized Finance) loans use smart contracts on blockchains — no KYC needed, you keep custody of your keys, but there's no customer support if something goes wrong.

It depends on the platform. CeFi platforms like Ledn and Nexo require full identity verification (KYC). DeFi protocols like Aave and Compound require no KYC — just a crypto wallet. Some CeFi platforms like CoinRabbit also offer no-KYC loans.

In most jurisdictions, taking out a crypto loan is not a taxable event because you're borrowing, not selling. However, if your collateral is liquidated, that may trigger a capital gains tax event. Interest payments may also be deductible in some cases. Tax treatment varies by country — consult a tax professional for your specific situation.

The main risks are: liquidation if collateral value drops, platform insolvency or hacking (for CeFi), smart contract bugs (for DeFi), variable interest rate spikes, and regulatory changes. You can mitigate these by choosing lower LTV ratios, using audited platforms, and diversifying across providers.

Yes — that's the entire point of crypto loans. You use your Bitcoin (or other crypto) as collateral and receive a loan in USD, EUR, or stablecoins. You keep ownership of your Bitcoin. When you repay the loan plus interest, your Bitcoin is returned. This lets you access liquidity without triggering a taxable sale event.

Crypto loan interest rates typically range from 2.9% to 18% APR depending on the platform, LTV ratio, and collateral type. CeFi platforms with loyalty programs (like Nexo) offer the lowest rates. DeFi rates are variable and depend on market supply and demand. No-KYC platforms tend to charge higher rates.