It is possible, but it is risky!
Some protocols offer loans without collateral. But they are riskier for investors than platforms requiring collateral. Collateral is used to protect cryptocurrency lenders.
It is risky to take out a crypto loan without collateral, as the lenders who claim to offer this service may be criminals looking to steal your money or your identity.
Why Do Crypto Loan Providers Require Collateral?
Collateral is used to secure the deposit
Unlike conventional loans, crypto loans do not involve credit checks. Instead, lenders use collateral as security to reduce loan risk. Collateral will be seized if the borrower is unable to repay the obligation. People with little or no credit history can use this strategy to borrow cryptocurrencies.
The risk level of the loan is calculated from the amount of the guarantee
Crypto-loan providers may also use collateral to assess the risk level of the loan and loan terms, such as payment term, interest rate, and amount of loanable funds. The concept is simple: the larger the collateral, the lower the risk for lenders.
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Which platforms offer unsecured crypto loans?
- Aave: this is undoubtedly the most popular unsecured loan platform with its famous Flash loans.
- Goldfinch.finance : unsecured loan for borrowers approved by auditors.
- Atlendis.io : loan without guarantee for pre-approved institutional.
So you understand that unsecured crypto loans are not very accessible to individuals. So if you come across a lending platform without guarantee and without prior verification of the borrower profile, beware!