What is crypto lending? Borrowing and lending against crypto explained
By SendPay Business · · 2 min read
Crypto lending covers two things: lending your crypto to earn interest, and borrowing money by putting crypto up as collateral. It can be done through companies or through DeFi apps, and both carry real risk.
How a crypto-backed loan works
- The borrower locks up crypto as collateral, usually worth more than the loan.
- The lender pays out cash or stablecoins.
- If the collateral's value falls too far, the borrower must add more or it gets sold.
- When the loan and interest are repaid, the collateral is released.
Centralised vs DeFi lenders
Centralised lenders are companies that hold your crypto for you. DeFi lenders are smart contracts that run automatically. In 2022, several large centralised lenders, including Celsius and BlockFi, froze withdrawals and filed for bankruptcy, leaving customers unable to reach their funds.
Key risks
Sharp price falls can wipe out collateral, the lender itself can fail, and smart contracts can be hacked. Crypto loans and deposits don't have the protection that bank deposits have.
Where SendPay fits
SendPay doesn't offer lending or crypto loans. SendPay platforms let your customers buy, sell and hold crypto, held with regulated partners, alongside GBP, EUR and USD accounts and branded Visa cards.
Build it
Create your own financial platform.
Pick a template, name it, brand it, preview every page before you pay. Your brand, your users, your fees.
Build my platform →Questions people ask
What does a quoted rate really pay?
Convert a rate between APR and APY to see what compounding adds.
APR to APY calculator →Read next
This guide is general information, not legal or financial advice. SendPay Business is a technology company, not a bank, and does not take deposits; regulated services on the platforms are provided by licensed partners. PayPal, Patreon and Substack are named as reference points only and are not affiliated with SendPay Business.