Bitcoin lending: the borrower’s perspective

Most banking services are more accessible these days to the average person, but credit options remain among the ones limited to a selected number of people. Being awarded a credit requires a stable job, owning properties or an excellent credit score which not everyone has.

Financing alternatives for users with lower profiles are usually limited, expensive and time consuming. For those, P2P lending is a great alternative, and Bitcoin offers important advantages over the same kind of loans in fiat.

What can you use BTC loans for?

In countries where Bitcoin is “widely” accepted, Bitcoin loans are more or less the same as their traditional counterparts, at least when it comes to the opportunities to use it. You can request loans for virtually everything, from paying your tuition fees and buying Christmas gifts to liquidating other debts and booking your next vacations.

In the rest of the world, Bitcoin loans are still quite useful for more specific purposes, including purchasing goods and services online, investing in crypto operations which you think will be profitable or as last resource.

In general, Bitcoin loans are mostly taken for the following reason:

  • Business: You have a great idea but do not have the funds to get going, probably you need some digital assets or something that can be bought with Bitcoin. You need to take advantage of a great sales period, but you do not have the money to increase your stock and a traditional loan takes too long to be approved or you do not have access to them (because you are independent and do not have a contract to back your request, and you have rarely used credit products hence your credit score is almost non-existent).
  • Start or expand a mining operation: You live in a country where energy is cheap, but cannot afford to buy mining equipment (because the odds are that your local currency is extremely weak) or you want to get more hash power because you are getting great returns from your mining. This may be considered a subset of the previous category.
  • Trading: You have the feeling that a particular cryptocurrency will go up in the next days or that Bitcoin price will fall, you see a great opportunity to profit but do not have enough money for the operation.
  • Personal reasons: You are short of money and live in a country where BTC can be used for everyday activities. You have a personal / familiar emergency and need money right now. You have pending loans and you cannot find another resource to meet your obligations.

Purchasing mining hardware with Bitcoin

Buying mining hardware: a common reason to request Bitcoin loans

How do interest rates compare to traditional alternatives?

Credit cards are among the most popular credit services, but they also portray one of the highest interest rates. With very few exceptions, banks rarely charge less than 20% for financing your expending with a credit card. It is also difficult to get approved for one if you do not have a good credit score or something solid to demonstrate capacity to repay.

Other kind of loans have lower rates, as low as 5%, but are also awarded based on credit scores. Average people, especially in third world countries where banking services are still taking off, are offered rates that are not competitive if they even have the chance to get a loan.

With an average annual interest rate of around 20%, Bitcoin P2P lending is an excellent alternative for a wide range of borrowers. And that is only to mention the advantages from the economic point of view, because fiat loans also take up-to a couple of months while the bank verify your credentials and you can even receive a no after waiting that much.

How to get verified to start borrowing?

Most platforms require their users to confirm their identities, in a process that usually takes a couple of days. First, you have to introduce your personal details, including name, last name, address, phone and email. Second, you need to fulfill your financial information, especially employment status and proof of income. You also need to provide a valid ID to get verified, either by submitting a digital copy or by going through video verification.

You are as well given the option to link your social accounts and information from other websites such as trading platforms, online retailers or exchanges. While this is not mandatory, it helps to improve your rating and the odds of getting your loans funded.

A-rated BitBond borrower

An A-rated borrower on BitBond: see how he linked his eBay, Amazon and PayPal accounts to boost the confidence on his account.

What are the advantages?

The peer-to-peer environment disesteems the impact of credit scores. Some platforms have their own internal rating, which will limit the amount you can borrow, but you are still allowed to post your requests and try to convince lenders to give their money to you.

The way lending works on this sites also let you build trust relationships with past lenders, which will be incentivated to fund your loans again if the experience was positive.

What are the risks?

The main risk comes with not being able to pay back a loan. If you are an honest person who cares about his reputation, regardless of if you will request future loans or not, you will have to appeal to last instance resources: you may need to take a new loan to pay back what you already owe.

If you ever default, the odds that you will receive negative feedback are high, and that sole fact will scare many investors away of you in the future. Depending on how bad was the situation, you can even ruin your reputation forever and not be able to ever get a loan funded.

The best way to keep your good name is by honoring your debts on time, so be careful with the amounts you request, and, if possible, have a plan B.

How to get a loan?

After getting your account verified, you just need to post a convincing and honest request and wait for lenders to fund it. Some platforms limit certain countries based on high default rates, repeated fraud attempts or legal issues with its policies.

The amount you can request and the period to pay it back are bound to your verification level and past activity. Loans may be as high as a few thousands of USD worth of Bitcoin and be set to be repaid within up-to 5 years in monthly payments.


Many investors have had a negative experience with lending themselves and the internet is full of their sharing their thoughts. Bitcoin loans may be a huge saver in moments of crisis or come in time to let you take advantage of a great opportunity, so you have a good incentive to fight against the aforementioned threat.

As a borrower is your obligation to contribute with creating a better environment for P2P lending by being honest (with whatever information they ask), transparent (providing as much information as you can), clear (stating what the loans is for with as much detail as possible) and honoring your promises (paying back in full and on time).