Crypto-backed lending is becoming increasingly popular. But don’t forget that the business model is not even 3 years old yet. It can still be confusing to anybody who’s starting to adopt cryptocurrency into their business.
Lending companies, including FiFit, urge users to borrow against crypto instead of selling it. But why should anyone get a loan if they already have some coins? Here are 5 reasons to get a loan against your crypto.
1. Save Money
Trading increases your tax liabilities in USA, European Union countries, Canada, CIS and other jurisdictions that see crypto as gain you owe taxes on profits. You also pay service fees to exchange or withdraw funds.
Borrowing on FiFit helps to avoid both tax implications and exchange fees that impact your overall cryptocurrency investment strategy. If you can choose your interest rate yourself, it is likely that related costs of borrowing will be lower than in other cases like selling or exchanging your funds.
2. Keep Crypto
If you believe in the asset, you’re supposed to be patient, even if the price is dropping. Most crypto investors formulate a long term investment portfolio.
What if you anticipate another asset to skyrocket and you need funds to get in immediately? What if you need it for a personal reason?
With a crypto-backed loan, you meet your urgent cash needs without losing the ownership of the crypto asset. You can start small and if the market value of cryptocurrency fluctuates, you can add collateral or withdraw collateral from an ongoing loan.
You can repay the loan earlier without penalty. Afterwards, you can get your crypto-collateral back.
3. Earn Money While Holding
While you wait for passive income, it would be nice to also make some money. FiFit users usually diversify their investments and apply for numerous trading strategies.
Rebalancing and diversification are important to maintaining risk levels of investment over time. To build a diversified portfolio, investors look for assets that haven’t historically moved in the same direction and to the same degree. Even if a part of the portfolio decreases, the other part is likely to increase. Or at least it wouldn’t fall as much.
4. Turn the Loan Upside Down
Another idea for profit making is to use FiFit to earn on your assets as you may earn on ordinary bank accounts. This way you get guaranteed fixed interest on your coins. Usually, interest is accrued daily and credited to your account on the first day of the month.
5. Avoid Borrower’s Risk
Crypto-collateral ensures timely repayment, reduces unwanted delays, and eliminates credit checks and other paperwork. No need to prove solvency, which is the ability to meet long-term debts and other financial obligations.
With crypto-backed loans, you don’t have to worry about failing to repay the loan on time and it’s consequences. Defaulting won’t damage your credit score. Also, as banks are not involved, they can’t close your accounts or block you from applying for a loan again.
Perhaps it’s time to broaden your understanding of crypto-backed loans. If you liked our “5 Reasons to Get a Loan Against Your Crypto” and found some valuable information, check this space regularly to get more updates on crypto-backed loans and cryptocurrency.