Crypto lending works the same way traditional loans work, yet there are slight differences. We usually get a traditional loan from a centralized entity such as a bank. Crypto loans stem from an individual like yourself. Nevertheless, the concept is the same: Borrowers seek funds, and lenders provide them.
Crypto Lending Platforms
But how does one connect with potential borrowers in the crypto world? Traditional loans come with the convenience of having banks readily approach to submit loan applications. Similarly, crypto lending platforms, or crypto lenders, play the role of these banks and financial institutions.
These platforms facilitate crypto lending (commonly known as DeFi). They let users to lend and borrow cryptocurrencies among themselves, engage in trading activities, and earn interest.
Lending platforms have a similar structure to a money market, where lender deposits are pooled to cater to borrower needs. These platforms operate by lending out your crypto on your behalf, and compensate you with a yield for your participation. Yield accrues immediately and is paid out based on your share of the lending pool.
When you borrow against your crypto, you receive a sum of money in exchange for using your cryptocurrency assets as collateral. Unlike traditional loans, where physical assets like cars or houses serve as collateral, in crypto loans, borrowers pledge their cryptocurrency assets.
Borrowers retain ownership of these assets even when they’re held as collateral. Therefore, if the market value of the assets appreciates, the borrower still enjoys the benefits of the increase in value.
Types of Crypto Lending Platforms
BlockFi
BlockFi is a crypto lending platform in the UAE. It focuses majorly on offering users investments and loans. The amount of efficiency you can derive from your digital tokens hinges on two primary factors. These factors are your token and the size of your investment.
For instance, if you’re interested in earning interest on Ethereum, BlockFi offers a 5% APY. However, this rate is applicable only to the first 1.5 ETH deposited. Deposits exceeding this amount, up to 5 ETH, will receive a reduced APY of 1.5%. Investments beyond 5 ETH will yield just 0.25%. Consequently, BlockFi emerges as one of the top crypto lending platforms for smaller investments.
AAVE
AAVE extends beyond mere lending and borrowing. It is very popular for its decentralized liquidity protocol. AAVE lets users to earn interest on their crypto deposits and access borrowing facilities by staking their assets, among other functionalities. Navigating through the platform, users can readily discover interest rates and other key factors. Additionally, AAVE offers various features, such as Bug Bounty and Flash Loans.
eToro
eToro is a top crypto loan platform in the UAE. Through its eToro Money Account, traders can easily request loans, with Ethereum or Bitcoin serving as collateral. This account is seamlessly integrated with your eToro brokerage account, facilitating asset trading, swift withdrawals, and real-time tracking of holdings. It represents a valuable service offered by the eToro investment platform. eToro works for traders at different levels in the UAE, offering a virtual trading account to acquaint users with its features.
Nexo
We cannot talk about top lending crypto platforms in UAE without mentioning Nexo. It is a leading crypto lending platform in the UAE because of its prompt approvals. Its secure banking application simplifies lending and borrowing processes. Traders can earn interest rates of up to 12% on both cryptocurrencies and fiat currencies, making Nexo an appealing option for both novice and seasoned traders in the UAE. The Nexo platform for crypto lending is user-friendly. It has no origination fees or monthly charges. Crypto loans on Nexo undergo automatic approval.
Final Words
If you do not have enough resources to buy a certain amount of crypto, opting for a crypto loan allows you to tap into the value of your digital assets without liquidating your holdings. It’s important to opt-in for a platform that aligns with your specific needs. Ultimately, with careful planning, borrowing via crypto loans is cheaper and incurs lower costs compared to personal loans.
