Understanding Crpyto Lending

in #cryptolast month (edited)

Cryptocurrency lending platforms offer opportunities for investors to borrow
against deposited crypto assets and the ability to lend out crypto to earn
interest in the form of crypto rewards. Lending platforms became popular in
2020 and have since grown to billions in total value locked on various
platforms.
Crypto lending has two components: deposits that earn interest and
cryptocurrency loans. Deposit accounts function similarly to a bank
account. Users deposit cryptocurrency, and the lending platform pays
interest, up to 8% APY (depending on the platform and the cryptocurrency).
The platform can use deposited funds to lend out to borrowers or for other
investment purposes.
Crypto loans are typically offered as collateralized lending products,
requiring users to deposit from a minimum of 100% (and up to 150%,
depending on the lender) in crypto collateral to borrow cash or
cryptocurrency.
Like traditional loans, the interest rates vary by platform and require
monthly payments. Unlike traditional loans, the loan terms for
cryptocurrency can be as short as seven days and may go up to 180 days
and charge an hourly interest rate, like Binance. Then there are other
lenders who offer an indefinite line of credit instead, like Nexo, which offers
0% APR.

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