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How Much Collateral Do You Need for a Bitcoin Loan?

Published 28 September, 2019

    If you’re looking to get a US Dollar loan using your Bitcoin as collateral, then BlockFi can help. We make it fast and easy to apply and have funds delivered to your bank account. Currently, loans start at $5,000. If you’re in need of a larger loan, BlockFi offers loans up to $10,000,000. Still not enough? Let our team know and we’ll do our best to get you the loan amount you need.

    How do you calculate the amount of collateral needed for a Bitcoin Loan?

    The first step in getting a Bitcoin loan is to determine the size of the loan you’ll be applying for. Once you know the size of the loan you need, you’ll be able to calculate the collateral required for your desired interest rate. The amount of Bitcoin you need as loan collateral depends on your LTV (loan-to-value) ratio. LTV rates vary from 20% all the way up to 50%. As a result, your interest rate will vary depending on how much Bitcoin you would like to use as collateral. The lower your LTV, the better your interest rate will be. Other factors involved in your interest rate calculation are the loan amount, and where you live.

    Since the current price of Bitcoin directly impacts your LTV, the amount of Bitcoin you will need to provide as collateral for your loan will vary depending on the price of Bitcoin when you apply. That said, once you apply for your loan and are approved, you won’t have to worry about your loan’s interest rate fluctuating based on the price of Bitcoin. Your interest rate, collateral, and payment plan will be set for the duration of your loan, unless your loan enters margin call.

    How do margin calls work?

    When applying for your Bitcoin loan, you will receive a margin call price. If the price of Bitcoin falls to or below the margin call price, there are three options. 

    1. You can post additional collateral to bring you LTV to a healthy range.
    2. You can pay down your loan balance. This makes your collateral worth more against your loan, which brings your LTV to a healthy range.
    3. We can sell the necessary amount of your existing collateral to bring your LTV to a healthy range. (Subject to market fees.)

    You’ll have 72 hours to post additional collateral, pay down your loan balance, or sell existing collateral to bring the LTV back within a healthy range.

    How do you keep the Bitcoin I’m using for collateral safe?

    At BlockFi we take your financial safety and security seriously. As a result of robust custodial partnerships and operational procedures, BlockFi has a perfect track record for the safekeeping of client funds. This is one of the reasons we’ve received backing from investment partners such as Coinbase, Fidelity, Winklevoss Capital and many more.

    BlockFi utilizes Gemini’s custodial services to securely hold our cryptoassets. Gemini is a New York trust company licensed by the New York State Department of Financial Services. When you use our services, your Bitcoin is securely stored using their institutional grade cold storage systems. Additionally, BlockFi offers industry standard Two-Factor Authentication (2FA) to prevent unauthorized users from accessing your information. If you’d like to read more about how we securely store client assets, you can do so here. Additionally, you can read articles written about us on Bloomberg, Forbes, Yahoo Finance and other major news sources.

    When will I receive my collateral back?

    Once your loan is paid off, we will return the crypto that you used as collateral. It’s as simple as that. Bitcoin loans allow you to take advantage of the possibilities provided by a traditional loan while not missing out on the potential upside of holding Bitcoin. When you use BlockFi, you own your Bitcoin’s appreciation.

    If you’d like to find out what your Bitcoin loan possibilities are, you can use our loan calculator. For any additional questions about BlockFi or how our loans work, please contact us at support@blockfi.com. We love hearing from you.

    – The BlockFi Team

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    All BIA balances are stored in a custodial account with Gemini.
    Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are not subject to FDIC or SIPC protections. For more information, please see BlockFi’s Terms of Service.
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    Disclaimer: Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are riot subject to FDIC or SIPC protections. Security is our top priority. Please see our Vulnerability Disclosure Form and Bug Bounty Program.
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    Disclaimer: Rates for BlockFi products are subject to change. Digital currency is not legal tender, is not backed by the government, and BIA accounts are not subject to FDIC or SIPC protections. Security is our top priority. Please see our Vulnerability Disclosure Form and Bug Bounty Program.
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