What is peer to peer lending
Crypto for Beginners
P2P crypto lending is a procedure that allows you to utilize a platform to lend cryptocurrency, stablecoins, or fiat cash directly to a borrower interested in obtaining a crypto-backed loan. P2P crypto lending reduces the platform's influence in the loan and borrowing process. Peer-to-peer (P2P) crypto lending enables lenders to invest in loans with predetermined interest rates and periods. However, the absence of established P2P crypto lending platforms that provide customer service makes it difficult to identify a reliable supplier.
Rather than funding the loan itself, P2P platforms can:
- Set the loan's interest rate and conditions.
- Facilitate money transfers between the lender and the borrower.
- If the value of the loan falls dramatically, ask the borrower to pay down or contribute more security to the loan.
- Work with a custodian to keep the crypto assets safe while the loan is being repaid.
- Provide insurance to safeguard the collateral during repayment.
Investors can see the distinction between P2P lending and other typical financing choices such as savings accounts or loans. Lenders determine the rates, conditions, and amount they wish to fund on a P2P platform. This gives them more control over their investment than putting it in an account with a fixed APY. However, lenders do not get the whole amount of interest paid by borrowers. P2P crypto lending platforms generate money by taking a percentage of the interest paid by the borrower.
There is different way of how it works for borrowers and how for lenders.
- Create an account on a cryptocurrency lending site.
- Verify your customer's identity (KYC).
- Deposit crypto assets into the platform wallet – often at least double the amount you wish to borrow.
- To seek a loan, follow the platform's guidelines.
- Read and agree to the loan terms.
- Repay the loan plus interest and fees in accordance with the conditions of your lending agreement.
- Make an account on the P2P cryptocurrency lending network.
- Complete KYC verification — often by submitting documents that provide proof of ID and address.
- Visit the platform's dashboard for available loans and choose one to finance.
- Deposit US dollars, stablecoins, or crypto assets into the wallet associated with the account.
- To finance a loan, follow the platform's instructions.
- As the borrower repays the loan, you will get interest and returns on your investment.
The advantages of using a P2P crypto lending network mostly benefit the lender. Borrowers should think about things like interest rates, collateral requirements, and the steps the platform takes to secure your crypto holdings.