Decentralised cryptocurrencies provide massive opportunities for peer to peer lending and microfinance. If you’re looking to lend crypto, or you don’t have access to traditional banking services, then here are some of the best cryptocurrency microloan services.
Claiming the title of “the first peer to peer lending platform in the world, Lendoit is a decentralized, peer to peer lending service. It uses smart contracts to remove third party “middlemen”, and lets you arrange the loan specifics directly with your counterparty.
Lendoit launched in 2016 but only became production ready at the start of 2019. Lendoit doesn’t need any form of collateral from a borrower, so to ensure loans are actually returned, they put in place several innovative services:
- Borrower assessment: third parties local to the borrower’s country assess and rate borrower credibility.
- Smart compensation scheme: through the smart contracts used to arrange the loan, a tiny fraction of the loan gets reserved and stored as part of this scheme. This compensation scheme is to repay loaners in certain circumstances should a borrower default.
- Default market: In extreme cases, lenders can sell the loan to debt collection agencies.
While loan defaulting and debt recovery services are never nice to discuss, Lendoit’s platform has recovery options built-in. The borrower assessment ensures users can only take out loans if they are capable of paying them back. For this reason, Lendoit is not as anonymous as they would have you believe. While lenders and borrowers may not know each other, this credit assessment means you can’t borrow on this platform and remain anonymous.
Lendoit operates their smart loan contracts on Ethereum, and once executed, funds get transferred directly between participant’s wallets.
Lendoit support syndicate loans, and provide a loan marketplace. Once assessed and approved, loan requests are visible on the loan marketplace, where lenders can set their interest rate, and compete with each other.
Lendabit provides a secure blockchain lending platform, with no intermediaries. You can loan or borrow between $50 or $200,000, over three days or three years. Both lenders and borrowers can set their preferred interest rates and finance terms, but Lendabit charges a service fee of 0.5% to lenders and 1% to borrowers. There are also fees payable on the transfer of collateral, and the withdrawal of funds.
Loans get paid in Tether or Bitcoin only right now, and the Lendabit platform is still in a Beta phase. Anyone can sign up at the moment, and there are few restrictions on countries of origin.
You can withdraw some of your collateral payment should the value of that currency increase. Should the value decrease, you’ll need to provide more collateral, even if you’ve already secured the loan.
The biggest benefit of lendaBit is that there are no credit or identity checks required to borrow. If you have the necessary collateral to cover your loan terms, you can arrange a loan.
ETHLend is a decentralized, peer to peer crypto loan system, which also lays claim to the title of “the world’s first crypto lending marketplace”. launched in February 2018 by the UK fintech company AAVA, we don’t believe it’s the first.
As the name may imply, ETHLend connects lenders with borrowers around the world. There are few limitations, but the biggest is a restricted functionality for US residents. What this entails is not made clear. Powered by Ethereum smart contracts, there are no third-party intermediaries between lenders and borrowers.
As a borrower, you’ll need to provide collateral in the form of crypto assets. Bitcoin, Ethereum, or any other ERC-20 token is acceptable.
The interest rates are set by both parties at the start of the loan negotiation process, but ETHLend takes a percentage of interest payments from both the lender and borrower. This is currently set at 20% of the interest from the lender’s side, and a 2% initial fee on the first payment, taken from the borrower’s side. Should the collateral get used a 5% fee applies.
The biggest benefit of ETHLend is their Ethereum smart contracts. The loan begins as soon as you finish arranging it, gets regulated by code, and is transparently visible on the Ethereum blockchain. Loaners cannot renegotiate terms once agreed, and they can’t claim you never paid. ETHLend can’t steal your funds either, as they help arrange the loan, and build the smart contract, but are not involved in the financial aspects.
Start Lending Crypto Today
These websites show how easy it is to start lending or borrowing crypto. You can set your own interest rates and repayment terms, and have the funds as soon as you arrange the terms.
Be aware though, that cryptocurrency peer to peer financing isn’t without its risks. If you use you a service without collateral, you’ll have to share your information and wait for a credit check. If instead, you opt to secure your loan against a cryptocurrency as collateral, then you are at the mercy of the market. Should the price plummet, you’ll need to provide further capital. Should you choose to loan without any capital, you may lose your funds should the borrower default. Providing you are aware of the risks, and study the details of your particular loan, you should be ok.
If you’d like to release some cash from your crypto assets, but you don’t want to sell them, then a crypto loan with cryptocurrency security may be perfect for you. You can get quick access to funds, yet still keep your portfolio, providing you keep up with loan repayments.
If these microfinance systems don’t work for you, then why not take a look at Dan’s piece on the best crypto credit cards?
What’s your favorite way to lend or borrow crypto? Do you have any stories you’d like to share with other readers? let us know in the comments section below.