Top 3 Best Crypto-Backed Loan Providers (2021)
Loans Using Bitcoin or Ethereum or other Cryptocurrencies as Collateral are growing in popularity and many platforms offer them now – but which offer crypto-backed loans that don’t have ridiculous interest rates or high-fees?
Currently there’s only one provider we’d really recommend — and that’s Celsius Network, as they have by far the lowest fees, most assets under management, and transparency of any of the crypto-backed loan providers out there.
If for whatever reason you do not like or want to go with Celsius there’s two other decent platforms for getting a Crypto-backed loan currently, one being another centralized option and another being decentralized.
Our Personal Choice & Best Overall: Celsius Network
If you don’t mind using a centralized platform then Celsius Network is by far the best choice for getting a crypto-backed loan — they have rates as low as 1% or in fact sometimes even lower than that, which is dang amazing and better than any other platform.
Celsius also doesn’t charge a loan origination fee like most of their competitors, which makes things even better — not to mention they also don’t charge a fee for early repayment of loans like most of their competitors — meaning if you take out a 1 year loan from Celsius but want to repay it after just 6 months you can do so without having to pay for the other 6 months of interest or any early termination fees.
There’s no real downsides to Celsius — I mean they even have a $40 sign-up bonus offer when you get referred by someone — and often you can get other sign-up bonuses for taking out a loan with them (often $100 or so). Check this page of our site for the latest information on these promotions, and our referral code for Celsius if you don’t want to ask around among friends for their code for that $40 bonus.
Best Celsius Alternative: BlockFi Lending
If for whatever reason you don’t trust Celsius — maybe because their rates are “too good” or because you just don’t like the founders then BlockFi is a decent alternative with fair rates — they have a 2% loan origination fee and around 4% -> 8% interest per year on loans given out.
Overall it sounds bad compared to Celsius, but truthfully it’s very fair and competitive compared to the other alternatives. There’s dozens of Crypto-backed loan providers and most charge 9% -> 18% annually in interest fees and have many hidden fees.
They also have quite a few sign-up promotions, so make sure to check out this page of our website for the latest BlockFi promotions.
Best Decentralized Choice: MakerDao's Oasis-Borrow
If you simply don’t want to trust a 3rd party custodian you can always use the decentralized platform Oasis-Borrow by MakerDao — it has similar rates to BlockFi, often a bit less than Blockfi actually — and with no loan origination fee. You also get DAI and support the Defi-Ecosystem by using Oasis-Borrow.
There are downsides though — the liquidation mechanisms are more mechanical and thus if your liquidity ratio (collateral/loan-value) goes below your loan-terms you’ll be liquidated without mercy, without chance to put up more collateral, without potentially any warning in the scenario of sharp quick decline/crash. They also don’t offer any sign-up bonus, as, well, they don’t exist — it’s a protocol and there’s no 3rd party to incentivize you to use it — either you do or you don’t.
Overall MakerDao’s Oasis-Borrow is a decent choice — however it comes with slightly different risks than the centralized platforms — but ultimately they’d be our 2nd or 3rd choice over-all, as they’re MUCH better than all the other crypto-backed loan providers out there other than Celsius and maybe BlockFi.
Crypto-Backed Loan FAQ's:
Below we’ll cover some of the most common concerns or questions regarding crypto-backed loans, from risks of taking such a loan out, what the true cost of them actually is, and how safe they actually are — amongst other things.
What’s the true cost of a Crypto-backed loan?
On the surface it seems pretty example — The loan origination fee + the interest rate = the cost.
However this isn’t all there is to consider. When dealing with financial products it’s important to understand the opportunity cost. When you take out a crypto-backed loan at 20% LTV you lock up 5x the amount of crypto as the loan offers you in cash. It’s a safe loan, however it comes with lots of opportunity cost.
The most obvious and relatively risk-free one would be crypto-lending — if you are already taking a loan out with a crypto-backed loan provider then they’ll be doing this anyway with your collateral so it adds no extra risk in you doing this. Say you put up $10,000 of Bitcoin in Celsius as collateral at a 20% LTV ratio — you’ll receive $2000, pay $20/year in interest, and that’s it — a great deal on the surface.
But when you factor in opportunity cost, if you’d have taken that $10,000 of bitcoin and lended it out on Celsius you’d have earned $650, well a little more with the compound-interest effect, in profit after a year.
So the true cost of the $2000 loan is really not $20/year in interest, but $670/year in interest + opportunity cost. That’s a staggering 30%+ APY.
We aren’t saying Crypto-backed loans aren’t worth it or are bad, we have one against eth and one against bitcoin as this article is being written, but it’s important to understand the true cost of a crypto-backed loan. They still have good use-cases, but don’t get carried away thinking it’s just free money — it comes at a cost.
What are the Risks in Crypto-Backed Loans?
Beyond the opportunity cost outlined above there’s risks if cryptocurrency collapses or skyrockets — if a black swan happens — such as the US dollar hyper-inflating or Tether being shut down for Fraud — both are extremely unlikely but if such severe events occur then there’s a real risk that your collateral may be liquidated or those who have borrowed it from the 3rd party (or the oasis protocol).
Beyond this the only real risk is the opportunity cost we outlined above — it’s important to understand both these risks before taking out a crypto-backed loan.
Can you take out Multi-Collateral loans out with these platforms?
Currently the centralized choices (Blockfi and Celsius) do not really allow Multi-collateral loans, however they’re less likely to liquidate you if you have more collateral in your account — and thus they’re semi-multi-collateral in our opinion.
With Oasis-borrow you can take proper multi-collateral loans out, which insulates you from market declines slightly.