$ADA and $AVAX, the native tokens of smart contract platforms Cardano and Avalanche, respectively, can now be utilised as staking collateral assets on Binance Loans.
According to Binance’s blog post on July 26, 2021, crypto loans have similar fundamentals to regular loans. The way the funds are accounted for is where they differ. Banks and other financial organisations calculate credit ratings for conventional loans to figure out the degree of risk they take on with a borrower. Credit scores aren’t necessary with crypto loans because the lender can keep crypto assets collateral until the loan is paid.
Binance Loans accepts ADA and AVAX as staking collateral assets. Source: CoinCulture
Another distinction lies in the technological mechanisms behind the loan. Specifically, crypto loans work on a much shorter time frame than traditional loans and require the borrower to pay the interest hourly rather than monthly. Binance’s crypto loan services allow you to borrow from 7 to 180 days.
This is because cryptocurrencies are far more volatile than conventional currencies, posing more risk to lenders and borrowers. If the value of a cryptocurrency declines, the lender’s collateral may be worth much less than the amount borrowed. Therefore, hourly rates and shorter loan durations are used.
Crypto loans are appealing to investors for a variety of reasons. They often do not want to liquidate their assets, so it is advantageous to have the opportunity to obtain a loan.
Receiving interest on assets is another reason for a crypto loan. Traders can, for example, use BTC as collateral to get a loan in BUSD or USDT (any stablecoin). The collateral will be worth more than the loan, but it will be returned after the loan has been repaid in full, including interest.
Another advantage is the quickness with which cash may be obtained. BTC loans may be obtained very rapidly, making your crypto assets more liquid and convertible, allowing you to swiftly and quickly capitalise on market opportunities.
Here’s what you should know about Binance Loans:
You may borrow on Binance Loan provided that you are a Binance registered user. Binance Loans allows users to borrow 20 different cryptocurrencies, including $BTC, $BAT, $BNB, $DOGE, and $ALGO.
Binance provides loan periods of 7, 14, 30, 90, and 180 days. You can pay in advance, and the interest is computed depending on the number of hours borrowed. Interest is computed hourly, and anything less than an hour is treated as an hour. The period you take out the loan determines the interest rate. On the Order page, you must reimburse them manually. The interest must be paid first, then the principal.
LTV refers to the ratio of the loan’s value to the collateral’s value. Different collateral currencies have different starting LTVs, so the loan will have a varying value when you use different coins as collateral for the same loan. Collateral can be utilised for staking to make a profit and deduct the interest.