Borrowing money from Binance with crypto loans
Did you know that you can also borrow money on Binance? In this article, we will discuss how borrowing money on Binance works. And remember: borrowing money is not free!
Open an account first
Before you can borrow money, you first need an account on Binance. When you open an account using the button below, we’ll share our 20% friend discount with you. That way, you will permanently pay 20% less on all your trades!
What do you need to take out a loan?
Binance does not just provide a loan: you require collateral. This actually works the same way as with a bank. Banks ask you to put up your house or car as collateral for a loan, for example.
At Binance, you do not deposit fiat money, but crypto money. On Binance, you can deposit dozens of different cryptos as collateral.
You can easily buy cryptos on Binance by navigating to Trade and then Convert. Don’t have any funds on your account yet? In this article, you can read how to add funds to your Binance account.
Apply for your loan
The great thing about Binance loans is that they only look at technical data. If you meet the condition of the loan, it is automatically approved.
To apply for a loan, please fill in the following details:
- I want to borrow: the amount you would like to borrow. You can choose which crypto you want to receive.
- Collateral Amount: the amount of collateral you put up. You can pick which crypto you wish to use as collateral. It is advisable to use cryptos that you can stake.
- Loan term: how long do you want the loan to run? This can be between 7 and 180 days. It is always possible to repay early.
Once you have filled in the details, you can immediately use the Start Borrowing Now button to borrow the desired amount.
How does collateral work on Binance?
At Binance, you will be dealing with different terms for the collateral:
Initial collateral
The initial collateral is the amount you have to put up to take out the loan. You can calculate the LTV as follows:
Loan Value / Collateral Value
If you borrow $100 and your collateral is $150, your LTV would be 67% (150/100). On Binance, you can immediately see whether you can open a position with the collateral that you want to contribute.
Margin call
You will receive a margin call on your loan if your collateral is not enough. When the margin call takes place at 75%, you will be advised to deposit collateral if it has fallen too much in value. Remember that the interest is also part of the borrowed sum, and therefore lowers your available margin.
Liquidation LTV
The liquidation LTV indicates the value of collateral at which your position is closed. If the liquidation LTV is 83 then your position closes when the value of your collateral is less than $120 for a borrowed amount of $100. Interest payments are always added to the amount borrowed.
If your collateral is no longer sufficient, you can make an additional deposit. It is possible to add or remove collateral at any time. You can also repay a loan early at any time.
It is advisable to avoid liquidation. Binance charges an additional 2% if your loan has to be liquidated. Also, remember that loans always have to be repaid, this is no different with crypto loans.
How much interest do you pay on your loans?
Binance charges interest per hour, so you can borrow money for a short period. Under the overview on Binance, you can see how much interest you would pay per day. You can also immediately see how much interest you would pay for the duration of your loan and how much you would have to repay at the end of the term. The annual interest rate is around 15%.
By choosing collateral that you can stake, you can often reduce the interest rate to 0%. Keep in mind that your collateral may fluctuate in value.
Pay off your loan
You can redeem your Binance loan at any time. When repaying, you automatically pay the interest due as well. After you repay the loan, you will get your collateral back.
Is it wise to borrow money from Binance?
In the future, it will probably become normal to borrow crypto. For now, Binance is one of the few companies offering this service. An advantage of Binance is that everyone is eligible for loans: no extra checks are needed.
However, the interest rates on Binance are very high and there is a risk that your collateral will be sold. Because cryptos are very volatile, the value of your collateral can suddenly drop significantly, causing you to lose even more money on your loan. Borrowing money always costs money, and when you borrow cryptos, the risks are even higher.
Frequently asked questions about Binance loans
For 7 and 14 day loans you have 72 extra hours to repay your loan and for 30, 90 and 180 day loans you have 168 hours. However, you will pay three times more interest during this period. It is therefore wiser to repay your loan properly and then take out a new one.
Every Binance user can apply for a loan directly. The only condition for receiving a loan is that sufficient collateral must be deposited. You can find out how much collateral you need for each loan on the Binance website.
You can also make money on Binance by using Binance Earn. Binance then uses your crypto assets to offer various services; for example, lending money to users. Depending on the cryptocurrency, you can earn 5-10% on an annual basis with Binance Earn.
You can borrow dozens of different cryptos from Binance. You do need collateral for this. You can offer various cryptocurrencies as collateral.
Do you want to read more?
- Read the detailed Binance manual
- Discover how to make money with your crypto
- Read how to speculate with futures
- Examine what Leveraged Tokens are
