Crypto lending is a practice that involves lending or loaning out digital assets such as Bitcoin and ether to other crypto investors or financial institutions for a specified period. After this time, the borrower gives back the loaned crypto and pays interest on the value of the asset(s). This practice is similar to traditional lending in nature but instead applies to digital assets rather than physical ones.

Crypto lending is a growing practice because it allows investors to earn interest on their digital assets without having to sell them. It is a way to maximize returns on cryptocurrency holdings by lending the assets while you’re not using them or intending to sell during the specified period. 

Several cryptocurrency lending platforms are available in the market to facilitate the practice and ensure trust, each with its advantages and disadvantages. In this article, we will explain what is crypto lending, and provide a detailed overview of various cryptocurrency lending options, along with the risks and opportunities associated with this practice. 

You will also find a comparison table showing different platforms available to help you choose the best crypto lending platform based on your needs.

Click here to read reviews of the leading crypto platforms.

Why Investors Lend Crypto and How it Works

There are many reasons to lend crypto to others, such as obtaining liquidity for a project or covering trading positions without having to sell the crypto you own. Mostly, though, it is becoming increasingly popular because investors can earn interest on their digital assets and gain passive income without taking uncertain exchange rate risks.

If you want to lend crypto and start earning interest, here are the 5 steps to follow:

  1. Choose a crypto lending platform: There are many crypto lend platforms available on the market, each with its unique advantages and disadvantages. However, you need to choose a platform that suits your needs and investor profile. Consult our comparison below to learn more
  2. Deposit cryptocurrencies: Once you have chosen a platform, you need to deposit your digital assets – those you intend to make available to borrowers – into your account. The most commonly lent assets are Bitcoin and Ethereum, but the top crypto lending platforms will also accept many other tokens
  3. Define your terms and conditions: Once your cryptocurrencies are deposited, you should set the terms and conditions of the loan. It’s up to you to define the duration, interest rates, and loan guarantees. Be sure to carefully review the terms and conditions before validating them
  4. Select a borrower: Cryptocurrency lending platforms facilitate the connection between lenders such as yourself and potential borrowers. This could be an individual investor or a financial institution. Therefore, it is important to thoroughly verify the borrower and their situation before granting the loan
  5. Monitor interest payments and recover the investment: Monitor the interest payments throughout the loan, and at its maturity, recover your investment and interest by transferring them to your crypto wallet. You can also decide to reinvest them in a new crypto lend

What Are the Advantages of Crypto Lending?

Lending crypto has numerous benefits that help to maximize the value of your digital asset investments which explains why the practice is so popular. Here are the top 5 to consider:

  1. Generate passive income: The primary advantage of lending cryptocurrencies is the ability to profit from your digital assets through interest without the need to sell them. This allows you to maximize your investment returns while maintaining your participation in the crypto market
  2. Easy to access: Cryptocurrency lending is generally very accessible, with many platforms accepting deposits even of small amounts of crypto. This enables all investors to participate in this investment technique even with limited funds
  3. Obtain liquidity fast: Lending crypto also provides a means to obtain fast liquidity by loaning out digital assets to other investors. It’s therefore an excellent way to finance other projects or investments without the need to sell one’s tokens, which may incur additional costs and risks
  4. Diversify your portfolio: Crypto lending allows investors to diversify their investment portfolios by tapping into an additional source of income 
  5. Flexibility: Crypto lending platforms allow investors to individually choose the terms and conditions of their loans including duration, interest rates, and guarantees. This flexibility enables investors to adapt to their needs and risk profile

What Are Some Of The Exit Conditions?

Various conditions dictate the recovery of your digital assets after a crypto lending agreement is entered, and it is essential to understand these conditions before engaging in lending:

  1. Loan duration: The length of the loan term is defined in the terms and conditions and is predetermined at the start of the agreement. Once the loan period elapses, the loan expires and you are free to retrieve your digital assets
  2. Early termination: Some crypto lending platforms offer the option to end the loan before the originally scheduled duration. Early termination will usually incur penalties or additional fees to be paid by the lender
  3. Violation of loan terms: If the borrower fails to comply with the loan terms, the crypto lending platform may terminate the loan, allowing the lender to retrieve their digital assets
  4. Early repayment: It is possible to repay the entirety or a portion of the borrower’s debt before the originally scheduled duration. Total early repayment automatically terminates the loan and gives back the lender their coins
  5. Non-payment of interest: If the borrower does not pay the due interest on the loan, the platform may terminate the loan, allowing the lender to retrieve their digital assets.

Where To Engage in Cryptocurrency Lending?

There are cryptocurrency lending platforms that facilitate this practice by enabling investors to find borrowers and set their desired loan terms regarding length, interest rates, and security. If you are wondering what is a crypto lender, you will find that most are centralized, meaning that they’re run by a single company. But there are also blockchain-based automated lending protocols that use smart contracts. 

PlatformInterest RateTypes of LoansAccepted CryptosMinimum Loan Amount
NexoUp to 16%Short-term, Long termBitcoin, Ethereum, etc.$500
LednStarting at 9.4%Long termBitcoin$1,000
Crypto.comUp to 12.5%Short term (Up to 12 months)Bitcoin, Ethereum, etc.$100
Arch lendingUp to 14%Short-term (Up to 12 months)Bitcoin, Ethereum$10,000
SALT LendingUp to 19.95%Short term (Up to 12 months)Bitcoin, Ether, Bitcoin Cash, Litecoin, SALT, USDC, Tether, Paxos$1,000
YouHodlerUp to 12%Short termBitcoin, Ethereum, etc.$100

Nexo

Nexo lending

Nexo is one of the most popular cryptocurrency lending platforms in the market and has been around since 2018. It provides both short-term and long-term loans to users, using their crypto assets as collateral. Users can secure loans using cryptocurrencies such as Bitcoin, Ethereum, Litecoin, Ripple, and many others. 

One of Nexo’s main advantages is its highly competitive interest rate, reaching up to 16% when using stablecoins and depending on your tier level. Plus, it’s regulated in multiple jurisdictions including the US making it safe. You can also apply for a loan using their Nexo credit card, which is a prepaid debit card enabling users to spend against their loan instantly.

Ledn

Ledn lending

This crypto lender was also founded in 2018 in Toronto, Canada, and is also quite popular thanks to a relatively high annual interest rate starting from 9.4%. Loan requests are processed within 24 hours so you can receive your loan within 48 hours which is not so great in case of an emergency compared to other lenders with instant loans.

Unfortunately, Ledn only accepts Bitcoin as collateral and no other cryptocurrency. Besides, it’s not strongly regulated as it is only licensed in the Cayman Islands. That being said, the lender has received significant backing from companies such as Coinbase and 10T Holdings to make it quite safe and reliable as well. 

Crypto.com 

crypto.com lending

On Crypto.com, users can lend cryptocurrencies such as Bitcoin, Ethereum, and several other tokens, in exchange for interest. Interest rates vary based on the cryptocurrency and loan duration, reaching up to 12.5% for certain assets with added perks if you hold CRO, the platform’s native token. 

The platform also provides margin lending options for experienced traders, with leverage of up to 5x. It’s one of the top crypto exchanges and has a long and storied reputation meaning that you can be assured your crypto will be safe and guaranteed of earning interest. 

Arch Lending

Arch lending

Arch Lending is another trusted crypto lender located in the US and licensed by all relevant regulators to operate in the country. It is also known for its security by holding all client assets in secure cold storage through qualified custodians using bank-grade security to protect against any hacks or theft. 

Perhaps the main problem with this lender is that it’s only available to US residents, so other crypto holders don’t have access. Plus, you cannot receive small loans since it has a minimum security requirement of $10,000 in Bitcoin or Ethereum. 

Salt Lending

salt lending

In addition to functioning like most other cryptocurrency lending platforms, SALT Lending also offers a credit rating system for users, allowing them to secure lower interest rates on loans. The higher a user’s credit rating, the higher the offered interest rates. This enables users to reduce the costs of their loans by improving their credit profile. 

In short, SALT Lending is an intriguing alternative for users seeking fiat or cryptocurrency loans using their digital assets as collateral because you can earn very high interest on your assets. Besides, you don’t need a lot of crypto to enjoy the service provided your credit rating is great. 

YouHolder

Youhodler lending

The integrated exchange platform YouHolder stands out with its loan-to-value ratio that can reach up to 90%. Its low minimum loan amount of only $100 is also highly appreciated for users without a lot of capital. 

Available as an Android or iOS application, the platform offers diverse investment options. Users have access to portfolio management tools to monitor and manage their crypto loans. The platform provides real-time alerts on interest rates and loan deadlines, as well as options to renew or repay loans.

Cryptocurrency Lending: Our Opinion

Crypto lending is a burgeoning sector in the crypto market that allows users to lend their digital assets and earn interest while retaining their ownership. Among various DeFi projects, this is certainly one with a lot of potential and applications for its users, especially during market downturns.

The cryptocurrency lending platforms mentioned above each have their pros and cons. However, after testing them one by one, we have a slight preference for Nexo (Trustpilot rating: 4.7/5) and YouHolder (Trustpilot rating: 4.4/5). These two platforms are particularly comprehensive and competitive in terms of interest rates.
Keep in mind that we also provide investment advice on NFTs.

About the author

Robert Balmes

EN Robert Balmes est analyste financier depuis 2013. Il est expert dans les marchés actions, le Forex et les cryptomonnaies. Il participe à l’élaboration d’articles de fond sur des sites spécialisés comme Tokize.com.