What is a Collateralized Loan?


A collateralized loan is a type of borrowing where a client stakes an asset against the funds they are receiving. With BlockFi, clients send us crypto in exchange for USD or GUSD stablecoin. Once the loan is paid off, clients get their crypto back, along with all the potential increases in value that occurred over the duration of the loan.

What is collateralized lending and how does it work?

Collateralized borrowing is very popular in the lending world. Many different kinds of assets or securities can be leveraged in order to take out a loan. These assets can include real estate, cars, travel, and business assets.

The amount of collateral borrowers need to stake is determined by the loan’s LTV (loan-to-value) ratio. BlockFi offers LTVs up to 50%. Based on our extensive risk modeling, we determined that this is a sufficiently conservative rate, which helps our clients limit exposure to triggering events when the market faces volatility. Click here to learn more about BlockFi’s LTV calculations.

Why Do I Need Collateral For My Loan?

Why would I need to take out a personalized loan with collateral? Collateralization limits the risk exposure on the lender’s side. For example, the crypto markets are relatively volatile. If the value of your collateral decreases past a certain amount, the lender can liquidate a portion of the collateral to bring the loan back to good standing. The lender gets the reassurance of holding the collateral, the borrower gets to leverage the value of their long-term cryptocurrency investment and get it back once the loan is paid off. Win, win.

Benefits of a Collateralized Loan

Borrowing against your crypto assets enables you to access the value of your Bitcoin (BTC)Ether (ETH), or Litecoin (LTC)without having to sell. With BlockFi, we can fund USD straight into your bank account in as few as 90 minutes. Applying takes less than two minutes.

An additional benefit is that a BlockFi loan does not trigger a cryptocurrency capital gains tax event, saving you the headache around tax season. Additionally, in some circumstances, the interest paid on your loan may be tax deductible against certain types of investment income. With that said, BlockFi does not provide financial or tax advice and you should consider your financial situation and seek appropriate financial and tax advice before deciding to use our product. Explore more within our Resources Center.

What Happens to My Crypto During a Crypto Backed Loan?

All BlockFi client’s cryptocurrency assets are deposited with our institutional custodian, Gemini. Gemini is a depository trust and licensed custodian with legal liability and insurance requirements for safeguarding deposits. They also have a perfect security history with no hacks or client fund losses. Additionally, increases in value or supported forked coins are returned to the client once the loan is paid off. Find out more about our crypto custody policies.

What are the legal protections that ensure the return my collateral?

We have numerous protections set up for return of collateral. The first is the loan contract – it outlines our obligation to return collateral once the loan is paid off. BlockFi operates under Article 9 of the Uniform Commercial Code, which governs secured lending and file a UCC-1 with the state you reside in. Additionally, we work with a 3rd party loan servicer that is set up to guarantee execution of loan contracts.

What Can I Do With My BlockFi Loan?

BlockFi clients use their loan for a number of reasons. Individuals can use their loans to buy a home, pay their taxes, or diversify their investment portfolios. Business owners also look to BlockFi to help with funding needs. Use-cases include funding payroll, paying off taxes, and expanding their business.

Explore our Use Cases in more detail.

Why BlockFi?

BlockFi is the leading cryptocurrency to USD lender in the U.S. We have the largest lending footprint and the most affordable rates in the market. Additionally, our service does not require the use of a token, making it easier to obtain a loan. Applying takes less than 2 minutes and clients often go from application-to-funding in as few as 90 minutes.

If you have any questions about BlockFi or how our loans work, please contact us at support@blockfi.com. We love hearing from you.

BlockFi lets you use your Bitcoin, Ether, and Litecoin to do things like buy a home, pay down debt, or even fund your business without having to sell your crypto. Start your application now and get funded in as few as 90 minutes.

How a Bitcoin loan works

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Client Testimonials

PEOPLE ARE SAYING

As an investor with significant crypto holdings, BlockFi gave me a valuable tool to get capital, at a fair price, without liquidating my crypto holdings. Aside from offering the best price, their approach to secure storage and thoughtful loan to value ratios gave me confidence that they were the right partner to work with for my cryptocurrency needs.

ANDREW HANCOX
CEO, BLOCK8 VENTURES

As a long term crypto holder, it’s important to me to be able to leverage my existing capital without selling. Earning monthly interest all in one place has simplified how I use my cryptoassets.

ANGELA CERESNIE
CEO, CLIMB CREDIT

BlockFi makes it fun to be a hodler again.

DATOIMEE
REDDIT USER

We have felt strongly that this market needs access to debt beyond fragmented, short term margin trading options in order to reduce volatility, facilitate scale and put the financial infrastructure for this ecosystem on par with other asset classes. We're happy to have BlockFi as part of the Consensys family and see tremendous growth opportunities for their platform.

KAVITA GUPTA
MANAGING PARTNER, CONSENSYS

BlockFi was my first choice when looking to use crypto as collateral for a fiat loan. BlockFi's friendly and professional staff helped make for a very smooth process from start to finish.

STEVEN HATZAKIS
BLOCKFI CLIENT

It feels great to have my crypto be recognized as a real asset, which can used as collateral. I'm going to be able to immediately pay off a credit card I've been carrying a balance on.

CASEY R.
BLOCKFI CLIENT

Learn more about earning crypto interest and crypto-backed loans with BlockFi

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Fastest Bitcoin and Ether backed loans in the industry.

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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