Loans

Can You Buy Big-Ticket Items with a Crypto-Backed Loan?

Published, 27 July, 2020

One of the most common questions crypto users have is whether they can make a major purchase, like buying a house or a car, with their crypto assets. The answer can be complicated, as many mortgage providers don’t accept crypto as collateral. One possible solution is using crypto-backed loans to secure cash that can be put toward a major purchase

That’s right: You can now leverage your crypto holdings to borrow cash you can use to meet a wide range of financial goals. These include making a down payment on a home, investing in real estate, purchasing a car, funding a business, making home renovations, or refinancing high-interest debt, among other purposes.

Leveraging Your Crypto Assets

Obtaining a crypto-backed loan is similar to obtaining a traditional collateralized loan. With a traditional loan, you normally pledge a personal asset, like your primary residence or small business, as collateral in order to receive funds. If you can’t repay the loan according to the agreed-upon terms, the lender has the right to repossess the assets you’ve pledged as collateral.

With a crypto-backed loan, you pledge your crypto holdings as collateral for the money. There are several key benefits to obtaining this kind of financing. For one, it lets you maintain the potential upside of your crypto investment. If you’re like many crypto investors, you believe the investment will appreciate over the long term. By obtaining a crypto-backed loan, you don’t have to liquidate your crypto assets. Instead, your investment can remain intact and you’ll benefit from potential appreciation.

If the loan remains healthy (based on the loan-to-value ratio) over the course of the term and the loan balance is fully repaid, any crypto collateral is typically returned. Plus, you may be able to realize tax benefits. Obtaining a crypto-backed loan isn’t usually a taxable event, so you don’t have to realize capital gains or pay capital gains taxes when you take out the loan. As always, be sure to consult with your tax advisor for more details about your specific situation.

What You Can Do with Loan Funds

So what can you actually do with the money obtained from a crypto-backed loan? Quite a lot, in fact. Here are a few of the most common ways reasons people secure crypto-backed loans:

Purchasing a primary residence. Mortgage lenders usually don’t accept crypto assets as collateral for a primary residence. By taking out a crypto-backed loan, you’ll receive cash you can use toward a down payment for a new home.
Investing in real estate. Similarly, most lenders are hesitant to accept crypto assets as collateral to purchase investment property. But a crypto-backed loan can provide cash that you can use to purchase real estate investments and thus diversify your portfolio.
Making home renovations. Whether it’s remodeling a kitchen or master bathroom, building a new deck or refinishing a basement, home renovations can be a major expense. A crypto-backed loan can provide the funds you need to tackle a big renovation project without dipping into other sources of cash.
Consolidating high-interest debt. If you’re carrying large balances on high-interest credit cards, you could be paying hundreds of dollars a month in interest. You could use the cash from a crypto-backed loan to pay off higher-interest credit card balances, effectively making one loan payment each month at an interest rate that’s potentially lower than credit card rates.
Funding a small business. If you own a small business, there may be times when you need access to cash to fund working capital needs, meet payroll, or enable expansion. A crypto-backed loan can provide this kind of small-business financing without having to tap into potentially more restrictive or expensive sources of commercial financing.

How to Apply for a Crypto-Backed Loan

To apply for a crypto-backed loan, you provide a crypto lender with financial information as well as your requested loan amount, the kind of crypto assets you will pledge as collateral, and KYC/AML information for identity verification purposes. An application for a crypto-backed loan generally will not affect your credit score.

Once you receive a loan offer, review it carefully. Pay close attention to the interest rate, the APR, the origination fee, and the amount of crypto collateral you’ll be required to stake. Once you accept the loan offer, you will send your crypto collateral to the crypto lender’s custodian for safeguarding.

BlockFi offers crypto-backed loans using Bitcoin (BTC), Ether (ETH), and Litecoin (LTC) as collateral. Our easy online application only takes a few minutes to get started. To learn more, visit https://blockfi.com/crypto-loans or our contact us page.

Last updated on August 8th, 2022

As of February 14, 2022, the BlockFi Interest Account (BIA) is no longer available to new clients who are US persons or persons located in the US and existing US clients with BIA accounts are unable to transfer new assets to their BIAs. Learn More.

BlockFi Lending LLC NMLS ID#1737520 | NMLS Consumer Access

BlockFi Trading LLC NMLS ID#1873137 | NMLS Consumer Access

Digital currency is not legal tender, is not backed by the government, and crypto accounts held with BlockFi are not subject to FDIC or SIPC protections. Digital currency values are not static and fluctuate due to market changes. Not all products and services are available in all geographic areas and are subject to applicable terms and conditions. Eligibility for particular products and services is subject to final determination by BlockFi. Rates for BlockFi products are subject to change.

BlockFi Rewards Credit Card: For more information, please see BlockFi’s Terms of Service. BlockFi is not a Bank. Cards are issued by Evolve Bank & Trust, Member FDIC, pursuant to a license from Visa® USA Inc. Rewards are not offered by Evolve Bank & Trust and are instead offered and managed by BlockFi.

BlockFi International Ltd. holds a Class F digital assets business license under the Digital Assets Business Act, 2018 (as amended) and is licensed by the Bermuda Monetary Authority to conduct the following digital assets business activities: (i) issuing, selling or redeeming virtual coins, tokens or any other form of digital assets (ii) operating as a digital asset exchange (iii) providing custodial wallet services (iv) operating as a digital asset derivative exchange provider and (v) operating as a digital assets services vendor.

See blockfi.com/terms for more information.