{"id":440085,"date":"2022-02-22T10:33:27","date_gmt":"2022-02-22T10:33:27","guid":{"rendered":"https:\/\/www.finder.com\/uk\/?p=440085"},"modified":"2026-02-16T08:48:11","modified_gmt":"2026-02-16T08:48:11","slug":"cryptocurrency-loans","status":"publish","type":"post","link":"https:\/\/www.finder.com\/uk\/crypto-banking\/cryptocurrency-loans","title":{"rendered":"How do crypto loans work?"},"content":{"rendered":"

Crypto loans are not readily available yet in the UK – but they are elsewhere and may take off here in the future. For the crypto curious, they present an interesting opportunity to borrow against your crypto investments to free up capital for whatever purpose you have in mind. <\/p>

They allow you to take advantage of the value of your crypto assets without having to sell them. And because you aren’t buying or selling crypto coins, you can theoretically avoid capital gains tax. However, regulatory uncertainty in the UK has meant that crypto loans aren’t available here yet. Plus they carry a high level of risk due to the volatility of the crypto market – meaning you could end up pledging more than you own or even defaulting on your loan. <\/p>

Crypto is unregulated in the UK; there's no consumer protection; value can rise or fall; tax on profits may apply*.<\/div><\/article>

What are crypto loans and how do they work?<\/h3>

Crypto loans are a form of alternative lending that uses your crypto assets, like Bitcoin or Ethereum, as collateral. Theoretically, they can offer lower rates than you might be offered without collateral plus a fast turnaround. <\/p>

They work by using your crypto assets as security, similar to mortgages or logbook loans. Instead of pledging your home or car as security against a default, you pledge your cryptocurrency. If you fail to repay what you borrow, you’re at risk of losing your pledged crypto investment. <\/p>

Much like mortgages, crypto loans work on a loan-to-value – or “LTV” – basis. This is the value of the amount you’re borrowing against the value of the collateral you’re using to secure the loan. The lower your LTV ratio, the lower your interest rate. <\/p>

The important thing to note is that if the value of your crypto falls significantly below your loan’s LTV, it could trigger what’s called a margin call. This is when you are required to put up additional crypto assets or pay down the loan in order to maintain its original LTV. <\/p>

If you are unable to do either of these things, then the lender will sell your crypto assets in order to protect itself. <\/p>

How much can I borrow?<\/h3>

Most crypto lenders offer loans at a maximum of 50% LTV – or up to 50% of the current value of your crypto. However, there are some outlier platforms that advertise up to 90% for popular coins like Bitcoin and Ethereum.<\/p>

For example, if you took out a 50% LTV crypto loan, you could then potentially borrow \u00a35,000 if you were able to prove that your crypto assets were worth at least \u00a310,000 to secure it against default. Just remember, crypto loans are not currently in the UK just yet. <\/p>

Do I need good credit?<\/h3>

In more traditional forms of lending, your credit score can have a significant impact on how much you can borrow and the rate you’re offered. But this is not the case when it comes to crypto loans. <\/p>

Here, your collateral is your credit score. So there is no requirement to prove that you are a responsible borrower as long as you have the required amount of crypto assets. <\/p>

This is because the platforms can sell your crypto assets if their value drops between the required threshold or you fail to repay what you borrow. This means they won’t be out of pocket if you default, so they do not need to know if you have good credit or not. <\/p>

What does a crypto loan cost?<\/h3>

The cost of a crypto loan comes in the form of interest. So just like a personal loan, you will pay an interest rate on the amount you borrow. <\/p>

When you take out a crypto loan, you will be set an APR based on the duration of the loan and what level of collateral you are pledging. Across the pond, interest rates range from as little as 1% all the way up to nearly 15%. Typically, the lower your LTV ratio, the lower your interest rate. <\/p>

Crypto loan alternatives<\/h3>

Crypto loans are risky compared to other types of financial products because the value of your collateral can change so quickly. In some cases, you might only have hours to pledge more crypto before your lender sells some or all of your collateral. <\/p>

So it is worth keeping in mind other forms of borrowing that don’t rely on the value of your crypto. For example, you could look into the following loan options:<\/p>