Although bitcoin is not the first crypto-currency ever made, it is the first one that the world recognized as a legitimate crypto-currency. Though banks still do not recognize this as legal tender, it is undoubtedly the go-to crypto-currency in the financial markets today.
As such, it has also spawned several uses in the same way that banks operate. One of these is the opportunity to loan cash from other people’s Bitcoin assets.
Bitcoin cash loans are not centralized in any financial institution. It is a peer-to-peer investment opportunity where three parties are involved. These are the investor, the debtor, and the facilitator.
The investor in this financial loan lends his bitcoin, which the facilitator converts into its prevailing cash value, and then the borrower receives the bitcoin cash loan in his bank account. The borrower is expected to pay the principal amount plus the interest in cash back to the facilitator, then the facilitator will disburse the payments to the lenders.
The lender can invest as little as 0.01 BTC for bitcoin cash loans. Though the interest rates vary, we can say that it is lower than most banks and the average is 9% per year. The role of the facilitator, like Bitbond, is to create the electronic system where the lender and the borrower can facilitate the transactions.
The lender and the borrower must sign up for an account in the facilitator’s platform. This is where all the details of the transaction is kept and monitored. Once a contract has been fulfilled, both the lender and the borrower will see the terms of the bitcoin cash loan in their respective dashboards.
The facilitator’s duty in bitcoin loans is to create the rules and implement them. It is also the facilitator’s duty to set the rates, verify every user’s identity, and create a rating system to grade each member. The rating system helps all parties determine the credit-worthiness of the borrower.
On average, financial bitcoin loans mature anywhere from six weeks to a year. There are no known facilitators offering 24-month loans.
By all intents and purposes, bitcoin cash is nothing more than leveraging someone’s money to fund your business. From an investor’s perspective, it is an opportunity to earn more bitcoins by charging an interest. Despite this simple principle, it has key differences from traditional bank loans.
Global Accessibility – anyone from around the world can take advantage of bitcoin cash loans, provided that the facilitator offers this service. Banks do not work this way. You need to go to a brick-and-mortar facility, submit your documents, and apply for a loan. If you are not a resident of the same country where you are applying for a loan, the bank will deny your application outright.
Companies that offer Bitcoin cash loans like Bitbond do not impose this limitation. Apply for a loan from anywhere in the world, get approved in as little as 24 hours, and get funded within 1-2 business days.
Trust Scores–banks measure your credit-worthiness by assessing your current salary, past loans, and credit score. Bitcoin cash loans do not work like this. In the bitcoin community, you are assessed by what is called a Trust Score. This is a rating system that varies from one platform to another.
Your trustworthiness in the world of crypto-currency is basically determined by your social media presence. Since this is not regulated by any institution, the only way a community can assess the veracity of your identity is through social media and other proof of documents.
The community also takes into consideration the documents you submit. Many platforms for bitcoin cash loans require different kinds of documents to ensure that you are a real person. Here are a few examples of documents that may be required of you.[create account 1st)
Government ID – You have to scan and submit this for lenders to see.
Utility Bills – The name on the bill must match your account name and the names found on your government-issued IDs. This proves to the lenders that you have a permanent residence verified by traditional institutions.
Email – You will receive a code that you must act as proof that you are not a robot.
Credit card details – Lenders will find you more trustworthy if you can prove that you pay your credit card bills on time.
Records on online payment methods – if you are a verified user of platforms like PayPal, lenders will know that you are a real person with good financial standing.
Also Read: How easy to get bitcoin loans?
Bitcoin cash loans are the boon of anyone who has invested in crypto-currency who does not want to sell. The bitcoin you invested will return to you in bitcoin.
This means that your bitcoin assets are intact regardless of the current price of bitcoin. The difference is that you are earning more bitcoins without having to buy it from your own cash.
Read More: How Bitcoin Will Ever Reach 20K Again?
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