Binance is a well-known cryptocurrency exchange and they also offer crypto lending services. There are numerous crypto assets in the crypto market and as a result, some crypto users are not fully informed about the types of cryptos that can be used as collaterals for crypto loans on Binance.
This article will provide insight into those cryptos that can be tendered as collaterals. Keep Reading!
Key Takeaways
• When it comes to crypto loans, some of the most common collaterals include Bitcoin, Ethereum, etc.
• Crypto loans involve the borrower putting up a certain amount of cryptocurrency as collateral, and in return, such an individual is given a loan in a fiat currency like US dollars.
• The value of the loan is typically a percentage of the value of the collateral, and the interest rate on the loan is typically higher than the interest rate on a traditional loan, due to the increased risk associated with lending against a digital asset.
SEE ALSO: What Are the Requirements for Accessing a Crypto Loan on Binance?
What Types of Cryptos Are Used as Collateral on Binance
The types of cryptos that can be used as collateral on Binance can vary over time, but generally, they accept a wide variety of major cryptocurrencies such as Bitcoin (BTC), Ethereum (ETH), Litecoin (LTC), Ripple (XRP), Binance Coin (BNB), and others.
Binance also accepts some stablecoins like USDT, USDC, TUSD, etc. as collateral. You can access the full list of cryptos that can be used as collateral on Binance here.
Binance also has a crypto lending platform,Binance lending, which allows users to lend their crypto assets to the platform and receive interest on those assets. The assets that are supported for lending will also vary, but they tend to be the same stable assets that are a ccepted as collateral.
What Are Crypto Loans Collaterals?
A collateral is something of value that is pledged as a guarantee for a loan. In the context of cryptocurrency, collateral refers to a digital asset that is pledged as security for a loan.
When a borrower takes out a loan, they are required to put up some form of collateral to secure the loan. If the borrower defaults on the loan, the lender can seize the collateral and use it to repay the outstanding debt.
When the loan is repaid, the collateral is returned to the borrower. But If the value of the collateral drops below a certain level, known as the maintenance margin, the borrower is often required to deposit additional collateral to keep the loan in good standing.
It’s also worth noting that, the borrowing party is still the owner of the cryptos used as collateral, but the lender has the right to take ownership if the borrower is not able to pay the debt according to the agreement.
Frequently Asked Questions (FAQs)
Can I use ETH as collateral?
Yes, you can use ETH as collateral for crypto loans on Binance. Ethereum is supported by most crypto service providers and several exchange platforms as loan collateral.
How to borrow a loan?
Step 1: Go to the Binance website and app.
Step 2: Login into your Binance account
Step 3: Search for “loans” on the topmost of the homepage.
Step 4: Then, click “Start Borrowing”
Step 5: Select the asset you want to borrow and enter the borrowing amount.
Step 6: Choose the collateral asset and enter the collateral amount.
Step 7: Choose a loan term.
Step 8: After confirming the borrowable amount, collateral, interest, repayment, and more, click on “Start Borrowing Now”.
Step 9: Review the loan details on the Order Confirmation pop-up. Ensure you read the terms and conditions carefully and from there click on agree to the Binance Loans Service Agreement. Then click “Confirm.”
Final Thoughts
It’s worth noting that the collateral requirement, interest rate, and term of the loan may differ from the asset used as collateral.
For example, Bitcoin is generally considered to be a more stable and less risky collateral than other cryptocurrencies and as such may require a lower collateral ratio or offer a lower interest rate.
Also, the platform may add or remove some of the assets that are available as collateral at any given time, so it’s important to check the terms and conditions of the loans as well as the FAQs and policies on Binance before applying for one.
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