This post explains everything you need to know about Binance crypto loans.
Have you ever needed to perform a trade but you were short of funds?
Well, Binance Crypto Loans was created so that you will not find yourself in that situation again.
Wondering how that is possible?
Keep reading and I’ll tell you. 😉
Post Summary
- What Is Binance Crypto Loans?
- Binance Crypto Loans Terms
- How To Use Binance Crypto Loans
- Factors To Consider When Using Binance Crypto Loans
- Why Do We Use Crypto Loans?
- FAQs
- Conclusion
Click on any item above to read its details immediately.
1. What Is Binance Crypto Loans?
Binance Crypto Loans is a service provided by the renowned Binance exchange to enable users to borrow crypto funds whenever they have a need.
Crypto loans can be used anywhere; trading, transfers, withdrawal, staking, wherever you want to spend it.
Gratefully, you don’t need to pass any credit scores (like it’s the case in traditional lending) to get a loan from Binance.
Just use your crypto assets as collateral and pay back within the given time frame.
Cool, right?
Next, I defined some lending terms you should get familiar with.
Read on!
2. Binance Crypto Loans Terms
a. LTV
This means the loan-to-value ratio. It is the ratio of the value of your loan to the value of your collateral.
LTV helps to determine the amount of loan you’ll receive. It is the inverse of your collateral.
For example, if the LTV is 65%, it means that your collateral must be up to 35% of the value of the coin that you wish to borrow.
Most importantly, Binance uses LTV to evaluate lending risks. And as such, a high LTV means high financial risk.
This is how it is calculated;
LTV = Loan Amount / Collateral Amount x 100%
Now, we have initial LTV and liquidation LTV.
Initial LTV is the LTV when you first request the loan.
On the other hand, liquidation LTV is the LTV when the value of your collateral is too low to cover your loan.
That is to say, the LTV has risen above a given threshold and your collateral faces the risk of liquidation.
Remember that the crypto market is very volatile and the value of coins always changes.
b. Margin call
The margin call is a notification that requires you to increase your collateral because its value has dropped.
In other words, the LTV has increased and your assets may be liquidated if you do not increase your collateral.
c. Liquidation Price
When the liquidation LTV is reached, your collateralized assets are liquidated.
The liquation price is the total price of the assets that are liquidated.
d. Interest Amount
This is the amount of interest that you will pay on the loan.
e. Repayment Amount
Here, we’re looking at what you will pay back after taking the loan.
It is the sum of the amount you borrowed and the interest amount.
Hey, don’t let the theories scare you, all the terms above are automatically calculated and displayed on the Binance crypto loan age whenever you request a loan.
Moving on, I’ll show you how to use Binance crypto loans to get the coins you need.
Tag along!
3. How To Use Binance Crypto Loans
It’s simple to borrow and repay loans on Binance.
Follow these steps:
How to borrow
i. First, log into your Binance account.
Don’t have an account? I got you. Register with my link.
ii. Next you select ‘Crypto Loans’ from the ‘Finance’ menu on the home page.
iii. On the Binance Crypto Loans page, input the required parameters:
- the asset you want to borrow and the amount.
- collateral asset and amount.
- loan term (7, 14, 30, 90, or 180 Days)
Then click ‘Start Borrowing Now’
iv. An Order Confirmation will pop up. Read through and hit ‘Confirm’
v. The loan will be sent to your wallet.
In case you were wondering, here’s a list of coins you can borrow from Binance:
Important note: you must have a coin in your wallet that will serve as collateral before you can borrow. Check here to know the minimum amount for the loanable coins.
How to repay
i. Go to the Binance Crypto loans page again.
ii. This time, select ‘Ongoing Orders’
iii. Select the coin and click on ‘Repay’
iv. Next you can enter the ‘Repayment Amount’ directly or select a repayment ratio or just select ‘MAX’
Then click ‘Confirm repayment’
v. You’ll be notified of successful repayment. 👏
Also, you can check your spot wallet to confirm that your collateral has been returned.
Pssst…Not a fan of reading?
This infographic explains everything better. Check it out below.
In the next section, I mentioned the factors you should consider when borrowing from Binance.
Keep reading!
4. Factors To Consider When Using Binance Crypto Loans
a. Liquidation
Liquidation occurs when a borrower does not repay their loan.
Binance will then liquidate their collateral to cover for the loan.
Also, a liquidation fee is incurred from the total borrowed amount, which is set at 1%.
However, any assets remaining after the liquidation will be returned to your Spot Wallet in the original asset.
Therefore, you must ensure you can pay back your loan before you take it to avoid liquidation.
b. Terms
Another factor you should consider is the terms of the loan.
We already saw that you can choose from 7, 14, 30, 90, or 180 Days.
I’m sure you have a reason for borrowing.
So, opt for a term that is convenient for you to finish what you want to do with the borrowed crypto.
c. Interest
Remember that you’ll not pay back exactly what you borrow but a little more.
The good thing is that you’re using a coin you have in abundance to get the one you need.
So, confirm that the interest rate works for you before you proceed.
And why do we need crypto loans? I discussed that in the next section.
Tag along!
5. Why Do We Use Crypto Loans?
a. Crypto loans give us access to the coin we need without having to sell the one we have.
Say you have BNB and you need BUSD.
But you don’t want to sell your BNB.
You can use the BNB as collateral to borrow BUSD.
b. It is also a way to make extra profit.
For example, when you use BTC as collateral to acquire a loan in USDT or any stablecoin.
Obviously, your collateral is worth more than the loan.
After repaying the loan and the collateral is returned.
The BTC would have appreciated, leaving you with a profit. Cool!
c. Crypto loans are faster than traditional loans.
You don’t have to wait for days to receive the funds you seek.
It’s only a matter of seconds.
Moreover, crypto assets are extremely liquid and convertible, thus enabling you to capitalize on market opportunities quickly and easily.
d. No credit proofs are needed.
You don’t need to prove ownership of several assets to secure a crypto loan. (like in the traditional setting).
Just provide the coin you own as collateral and you’re good to go.
e. No restrictions.
You can use your crypto loan for anything; trading, staking, withdrawals, etc.
Isn’t that cool?
Let’s answer some frequently asked questions and then we can call this post a wrap.
6. FAQs
There’s nothing like a transaction fee here. Rather, you’ll pay interest on the crypto you borrowed.
It is calculated hourly, and less than one hour is calculated as one hour.
The interest rate is determined once you make the loan.
You can check the different interest rates for loanable coins on Binance here.
No, you can repay at any time before the deadline.
Perhaps, your LTV is lower than the initial LTV and you want to increase your collateral to say safe.
You can do that from the Loans Order page.
Not really.
It’s possible on Binance Margin, where you can amplify your gains on successful trades.
You get to use your initial crypto value in a trade, rather than as collateral for access to additional funds.
However, the risk of losses is higher here.
Your trade must retain a value that does not go below your initial investment of the margin trade.
Otherwise, you’ll face a “margin call” or a forced liquidation of assets to cover your investment.
This practice is common in low-volatility markets.
7. Conclusion
We have now come to the end of our discussion on Binance Crypto loans. I hope it was worth your time.
So, the next time you need a coin that you don’t have, just go there and use what you have to get what you need. 😉
Yet to register with Binance? You’re missing out on many crypto possibilities. Click here to get on board!
Got any questions for me? Drop them in the comments section below.
I’d also love to know your experience using this service. Feel free to share in the comments section too.
Hey, why not tell a friend your new discovery? Hit the share button on your way out. Thank you!
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