With the global economy more or less being in a slow down for the last few years - and banks and lending institutions implementing more stringent requirements to attain a loan - it comes as no real surprise that people are looking for more creative financing solutions.
While banks and loan providers are busy scrutinizing applicant’s credit history, and keeping shareholder’s interests first and foremost before granting a loan, Bitcoin’s ‘peer to peer’ approach is friendlier to people that need a to secure funds for a myriad of reasons.
This isn’t to say that every person seeking a Bitcoin loan is going to instantly get one, but there’s a greater chance that someone in the Bitcoin community will step up and help out someone in need.
While Bitcoin loans and traditional style loans aren’t quite the same, Bitcoin loans are subject to some of the same types of terms and conditions - like interest and scheduled loan repayment time frames.
In a lot of cases, borrowers can qualify for short term Bitcoin loans with lower interest rates than what a bank would offer.
Bitcoin Lending For Borrowers
The first step of requesting a Bitcoin loan is typically setting up an account at a website that facilitates Bitcoin loans to do so.
Borrowers will likely be asked to confirm details about their identity and their current income. (Verification requirements may vary from Bitcoin lender site to site.)
After the initial account set up, the next step is putting together your loan request.
This step requires potential borrowers to enter the amount of BTC they’re seeking, the reason that it’s needed, the time frame of the loan and the interest rate that borrowers are willing/able to pay on the loan.
Once the loan request has been published and made public (subject to approval,) potential Bitcoin lenders can review the request and decide whether or not they want to fund the loan in part or in full.
If the borrower and the lender can come to an agreement on the terms of the loan, the loan is completed.
If an agreement between the borrower and lender can’t be met, other lenders are free to make loan offers for more agreeable terms.
In most cases, Bitcoin borrowers will have a public profile available online with their repayment history, so making timely payments is the best way to have an account in good standing.
This also increases the likelihood that lenders will want to lend or do business with you again in the future - should the need arise.
Missed and late payments may be subject to fines and penalties, just like bank loans.
Bitcoin Lending For Lenders
People that have spare Bitcoin in their wallets and want the opportunity to earn a little something extra on their holdings might want to consider becoming a Bitcoin lender.
Not only do lenders get the chance to - hopefully - help out someone with a financial need, they make a return on the loan when borrowers pay back the principal of the loan including interest.
Obviously, there’s always a chance that a borrower might miss a payment or not pay the loan back at all, so lenders should never loan out more Bitcoin than they can afford to miss.
One of the best ways for lenders to assess risk is by checking the borrower’s history and making a decision based on previous loans and/or their verified credentials at the lending site.
In most cases, Bitcoin lenders are not subject to fees when they agree to funding a loan, but it’s always a good idea to read the terms of service just to make sure beforehand.
Not All Bitcoin Lending Sites Are The Same
If you search around you’ll find that not all Bitcoin lending sites are geared towards the same audience.
For instance, the Bitcoin Team at Kiva.org focuses on making loans primarily to rural and underbanked communities to help with the purchase of farm equipment, educational needs, basic home repairs and other basic life essentials many of us take for granted.
If you’re ready to start lending BTC or could use a helping hand with a short term BTC loan, any of these sites could prove helpful to you.
Thanks for stopping by and good luck!