What Types of Crypto Finance are there and when should I use them?

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A considerable rise in the popularity of cryptocurrency in recent years sees many individuals holding high-value portfolios, with at least some of their assets held in cryptocurrencies. So, whilst they are wealthy, they are cash poor.

When you want money quickly, but the circumstances and plans mean you don’t want to liquidate your assets, your option to increase liquidity and raise funds generally involves borrowing. Yet as a cryptocurrency holder, you can be left caught out and find lenders refuse your application if you wish to use your cryptocurrency as some or all of the security offered.

Using cryptocurrency assets as collateral to secure a loan can be complex when it comes to borrowing. Using the services of a leading high-value international finance broker who offer crypto finance can prove advantageous.

Many mainstream lenders are reluctant to lend based on cryptocurrency values, and it can often take approaches to the niche market of lenders to arrange sufficient finance at favourable terms, particularly where six, seven and eight-figure sums are required.

Why use crypto-backed borrowing 

Lending against your cryptocurrency digital asset portfolio enables you to gain the liquidity you need for other investments, be it a luxury purchase, property or anything else requiring large capital sums. Yet it may not meet your longer-term objectives or be right for you to sell any of your cryptocurrency. Doing so will mean you miss out on any future upsides and may not fit your fiscal planning or long-term goals. Crypto finance through a loan or mortgage is the ideal way to give you the liquidity you require without selling your cryptocurrency holding.

Crypto backed loans

Many investing in cryptocurrency need access to cash yet struggle to source high-value lending streams, especially when the loan is to be secured wholly or partially on a cryptocurrency portfolio. However, applications made via a broker where the client has been thoroughly vetted and assessed achieve more success for higher sums offered, lower rates and more favourable terms.

It can be challenging to achieve sufficient loan-to-value ratios alone, and brokers will be able to negotiate the best possible terms on your behalf and more favourable interest rates.

Crypto real estate lending

Another problematic area is mortgages secured by cryptocurrency. Many mainstream lenders and even smaller niche finance companies are reluctant to lend money backed by cryptocurrencies, so many will not entertain any applications made directly, no matter how wealthy the client is.

A finance broker with specialist crypto lending knowledge can access finance opportunities through lending organisations that will not deal directly with borrowers. Their expert knowledge of lenders and how they view and assess applications can allow borrowers access to mortgages secured solely or partially on their cryptocurrency portfolio. The presentation of a client’s current financial situation, prospects and desired outcomes, as well as highlighting some of the less visible benefits of lending to each client, ensure that the most advantageous rates and terms are achieved. Thus, unlocking higher-value opportunities to fund real estate purchases using cryptocurrency as collateral.

Crypto credit lines

Crypto credit lines are collateralised loans with no predetermined or fixed repayment term. Borrowers can borrow a certain percentage of their deposited digital assets; interest is only charged when the funds are withdrawn.

Crypto-backed borrowing can fund:

  •     Funding a deposit for a domestic or commercial property purchase
  •     Consolidating high-interest debts
  •     Funding a business opportunity 
  •     Investing in more cryptocurrency
  •     The costs involved in crypto mining

Tailored finance opportunities

Rarely are mainstream lenders prepared to offer crypto-secured loans. Still, it is possible to negotiate tailored packages using smaller or niche lenders at competitive rates and terms that fit your exacting requirements and will not require you to liquidate your cryptocurrency until you are ready. Where cryptocurrency forms part of a broader portfolio, it is essential to present your case correctly so the lender can understand and assess the risk you bring as a borrower. Facts and figures relating to your current situation are just part of the requirements borrowers use to determine your lending risk. An experienced broker will negotiate with them to assess your business assets, business income and future growth plans, and your financial situation to achieve higher loan-to-equity ratios and higher borrowing amounts at lower rates. It’s essential to present your application in the best possible light for lenders to understand the complexities of your situation. Approaching niche lenders with a track history of crypto lending allows them to negotiate on clients’ behalf an individual package often not available when approached directly by those who wish to borrow. 

A lending broker with experience in high-value borrowing arrangements will help you maximise your borrowing power and ensure that you are on the firmest possible footing to achieve the borrowing sums you need. They are there to answer questions for you and reduce the likelihood of friction developing during the often-complex process of arranging favourable lending agreements. Experience is essential to present less apparent facts that can make a material difference to the amount you can borrow and the repayment terms. So, it’s always worth choosing a financial brokerage with experience in the niche and smaller finance companies for borrowing secured against cryptocurrency as part of a varied portfolio of investments and when it is your only asset.

Raising your LTV ratio.

As with all lending, cryptocurrency borrowing is no different. It’s essential to maximise your loan-to-value ratio to the highest possible level not only to borrow more but also to attract more competitive terms and lower interest rates. This is especially important when you wish to use more unusual or risk-heavy assets as collateral, many lenders will refuse borrowing at the mere mention of cryptocurrency as security for lending, and the rest generally choose to deal with clients through brokers. The best terms are usually reserved for borrowers making their application with the support of a finance broker who is likely already known and trusted by them. So your choice of broker should be one with a proven track record of arranging finance using a wide range of assets. Particularly cryptocurrency, to negotiate high-value lending arrangements for high-value clients seeking funds for investment both in the UK or overseas. 

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