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Most Trusted Cryptocurrency Loans ➡ Best Rates Binance 2023
What Are Binance Crypto Loans?
In this article, we walk you through every detail you need to use and understand Binance’s Crypto Loans platform.
Binance Crypto Loans gives you the ability to borrow cryptocurrencies like USDT, BUSD, BNB, BTC, and ETH. You can repay your loan in part or in full at any time, and there are no transaction fees!
That means you can get instant access to liquid capital for whatever you want, whenever you need it, without selling your crypto.
All you need is a KYC verified Binance account and some crypto to get started, as all Binance users qualify for Binance’s lending platform. Firstly, let’s cover a few ways to save money before you borrow, then we will get into the details of taking out and managing a loan. If you get confused, don’t forget to check the Binance Crypto Loans Terminology section below.
What Is SWAP FARMING? Free BNB + Binance Liquid Swap Explained 2023
Binance Crypto Loans Discounts and Promotions
As noted above, you’ll need a Binance account to use Binance Crypto Loans. If you don’t already have an account, use Binance referral code SRC2N1F2 when you sign up to save 20% on trading fees for life.
Next, before you take a loan, make sure to check the Binance blog for current Crypto Loan deals. Sometimes Binance offers lower daily interest rates based on the coin you borrow or the collateral type you borrow against.
For example, the current promotions at the time of writing this article are:
- Daily interest rate as low as 0% when borrowing BUSD with CAKE.
- Daily interest rate as low as 0.004% when borrowing BUSD with MDX.
- A discounted daily interest rate of 0.04% when borrowing BUSD, and 0.06% when borrowing USDT.
On the coins above, CAKE and MDX interest rates are reduced via Loans Staking. This is when a coin that can be staked is used as collateral and is then staked to reduce interest.
Binance has really shown itself to be the absolute best place for crypto yields. Many competitors went under in 2022 during the bear market, but Binance remained solid, and customers continued to get yields.
Binance Crypto Loans Overview
The Binance Crypto Loans platform is one of the best cryptocurrency lending platforms out there. Namely, this is due to their competitive rates, generous liquidation fees, large selection of coins, and the fact that Binance offers a level of security, trust, and accessibility that is hard to beat.
Plus, the process of taking out a loan is super easy, especially if you already have crypto in Binance. Here is how it works.
With Binance’s Crypto Loans, you can borrow crypto by using another crypto you hold as collateral. You can borrow up to 65% of your collateral’s value, depending on the asset.
For example, by putting $10,000 of BTC up as collateral you can borrow 6,500 BUSD (65% of BTC’s value).
Loans are subject to a few different rules, all of which we will cover in detail in the article, but a simple example of a crypto loan on Binance looks like this:
- Select the asset you want to borrow and the asset you want to put up as collateral.
- Input the amount you want to borrow, and the amount of collateral you need to put up will be automatically selected.
- Decide the duration of the loan, between 7 – 180 days.
- Lastly, you’ll see the terms of the agreement, such as your liquidation price and the current interest rates which you must agree to in order for the loan to be taken out.
Once you take your loan out, you can pay it back at any time by paying off the loan + interest using either the asset you borrowed or the asset you used as collateral.
However, if you miss the deadline to repay or your collateral value falls below 83% due to the price of your collateral going down, the loan will be liquidated. That means your underlying collateral will be sold off until the loan is paid back, and you’ll pay an additional Liquidation Fee of 2% of the total originally borrowed amount.
That is all there is to it!
The rest of the article will explain the details such as how liquidation prices are determined, how to avoid liquidation by repaying loans, adding collateral, and we will provide some more in-depth examples of Binance loans and what they have to offer.
A crypto loan is a secured loan where you pledge your crypto assets and can borrow another crypto in return. Unlike a bank loan, which can depend on your credit score, anyone can borrow on Binance if they have the collateral to back the loan. Binance’s Crypto Loan platform is Binance’s crypto lending platform.
How to Use Crypto Loans
In this section, we walk you through taking a loan out on Binance. In the next section, we will go over managing your loan and then repaying it with interest.
To take out a crypto loan on Binance:
- Create a Binance account if you haven’t already. Then make sure to own at least one asset that can be used as collateral, such as BTC, ETH, or BNB (list of collateral assets).
- To start borrowing, go to the top navigation and click “Finance” -> “Crypto Loans”. This will get you to the main Binance Crypto Loans page.
- Select the asset and amount that you want to borrow.
- Choose the collateral asset. The collateral amount will automatically be filled out if you have already chosen the borrow amount.
- Decide on your loan term to determine the duration of the loan.
- Confirm the transaction by clicking “Start Borrowing Now” and then “Confirm”. Then select the amount and confirm the transaction to finalize the process.
Once you do this, your collateral is transferred from your spot account, and the borrowed asset is received in your spot account.
You can take out as many loans as you like, as long as you have assets that can be used as collateral in your spot account.
Lastly, don’t forget to review the terms of the loan and keep in mind the penalties for not paying off the loan with interest before the loan expires.
Speaking of which, the next section will discuss managing and repaying your loan to avoid liquidation.
Different assets have different borrow limits, interest rates, and initial LTVs (see definition below). See a list of this Binance loan data for minimums, limits, rates, and initial LTVs on each coin.
Managing your Binance Crypto Loan
Taking a loan out on Binance is the first step, but to properly use Binance’s lending platform, you need to also know about managing your loan, as you’ll sometimes want or even need to add collateral or repay your loan before the loan expires.
Here are your options for managing your Binance loan:
- You can extend your loan term within 24 hours before the loan order expires by going to “Ongoing Orders” -> “Renew” and paying back the interest owed.
- You can then add or remove collateral at any time without impacting the loan term by clicking “Ongoing Orders” -> “Adjust LTV”.
- Finally, you can repay at any time by clicking “Ongoing Orders” -> “Repay”. Repayment can be made with either the borrowed asset or collateral. There is no fee for early repayment, and you can repay only part of the loan as well if, for example, you want to reduce the interest owed. Please note, however, interest has to be repaid before the principal.
That is all there is to it. Just don’t forget to verify that your loans are paid off after you repay, and to use your history to keep tabs on when your loans are due by clicking “Orders” -> “Loan History”.
Now that you know how to take out one or more loans and manage them, it is time to cover some terminology and detailed examples to know what everything means and how things work in practice.
Binance offers a short grace period for overdue loans called an Overdue Duration. For 72 hours (for loan terms of 7 and 14 days) and 168 hours (for loan terms of 30, 90, and 180 days), you will be charged 3 times the hourly interest. If repayment is not made in this time, your collateral will be liquidated to repay the loan plus interest, and the Liquidation Fee will be charged.
Binance Crypto Loans Terminology
- – The asset you are lending.
- Collateral Amount
- – The amount of collateral you will have to put up to borrow a certain amount.
- Initial LTV
- – Initial LTV is always 60% or 65%, depending on the asset. That means you will borrow 60% or 65% of your collateral’s value.
- Interest Rate
- – Your interest rate is the amount you owe on your loan beyond the principal as interest. It is calculated hourly but is presented as both an “Hourly & Daily Interest Rate”. The interest rate is based on the borrowed asset, not the collateral asset.
- Loan Term
- – The duration of your loan. You can select 7, 14, 30, 90, or 180-day loan terms.
- LTV (Loan-to-value Ratio)
- – LTV is the value of your loan compared to the value of your collateral. It is displayed as a percentage. The percentage gets higher as the collateral asset goes down in price against the borrowed asset. Your margin call and liquidation price are based on your LTV.
- Liqudiation Fee
- – If liquidation occurs, you are charged a 2% liquidation fee from the total borrowed amount.
- Liquidation LTV
- – Liquidation LTV is 83%. Once the value of your loan reaches 83% of the value of your collateral Binance’s liquidation engine will automatically close your loan by selling off your collateral. You will also pay a penalty for this.
- Liquidation Price
- – The price at which liquidation occurs. This is based on your Liquidation LTV.
- Loan Principal
- – A basic lending term. The loan principal is the initial amount you borrow when you take out a loan. When you pay back a loan, you owe the principal plus interest.
- Margin Call
- – Margin LTV is 75%. You’ll get a warning to top off your loan once the value of your loan is 75% of the value of your collateral.
- Overdue Duration
- – A grace period after your loan is due in which interest rates are increased. After the Overdue Duration, collateral enters liquidation. This does not apply to undercollateralized loans.
- Repayment Amount
- – The total amount you’ll owe at the end of the loan term.
- Total Interest Amount
- – The amount you’ll owe beyond the principal at the end of the loan term given the current interest rate. You’ll owe back this amount plus the principal.
Detailed Example of a Binance Loan
Let’s assume I want to borrow USDT to pay off some bills this month using my Binance Visa Card until my employer pays me later this week and I can make a deposit back into Binance to buy the USDT needed to repay my loan.
I’m choosing to do this instead of selling some BNB. Of course, I have some extra BNB in my account just in case the price doesn’t go up, but I am confident it will and don’t want to sell my current position to pay off expenses this month.
I can do the following:
Borrow: 100 USDT
Collateral: 0.27357265 BNB
Loan Term: 7 days
This will result in the following conditions for my loan:
|Initial LTV||Margin Call||Liquidation LTV||Liquidation Price(BTC/BUSD)||Hourly & Daily Interest Rate||Total Interest Amount||Repayment Amount|
|65%||75%||83%||~440.40 USDT (based on the BNB/USDT price on Binance)||0.002500% / 0.0600% USDT||0.42 USDT||100.42 USDT|
In the example above, I will borrow 100 USDT by supplying 0.27357265 BNB of collateral at the current market price (roughly 565 USDT based on Binance’s BNB/USDT price at the time of writing this example).
The duration of the loan will be 7 days. My initial LTV is 65%, as this is the current BNB LTV for all loans that use BNB as collateral. To be clear, this means I will borrow exactly 65% of the value of the collateral I deposit.
Importantly, my liquidation LTV is 83%. In practical terms, this means that if BNB’s price falls to ~440.40 USDT, it will enter the liquidation process. Given this, I will want to watch out for the margin call warning at 75% LTV.
I will be accruing interest in USDT for every hour I have this loan open. The current Hourly & Daily Interest Rate of 0.0025% / 0.06% gives me an idea of how expensive it is to borrow USDT. It also helps me understand the total interest amount I will pay (which is calculated as 0.42 USDT).
When I pay back the loan, I have to pay back interest plus the principal. Therefore, if I close my loan on its due date exactly 7 days later, I will owe the full Repayment Amount of 100.42 USDT. Meanwhile, I can reduce that amount by repaying the principal in part or full early. On the other hand, if I miss the expiration date, my rates will increase, and I could owe more during the overdue duration.
Of course, if I don’t repay, or if I let the price fall too much before I add collateral or pay back the loan in part, I face liquidation plus the liquidation fee. This is why it is important that I have kept extra BNB on hand. This will let me repay the loan in part or in full before the due date or simply adjust my LTV by adding collateral (although I could also increase the amount I’m borrowing by adjusting the LTV up as well, although in this example that wouldn’t help me meet my goals).
You must always pay back the interest owed before you pay back the principal. Keep this in mind when doing partial repays.
Why Use Crypto Loans?
Crypto loans are best used when you are not ready to sell a crypto asset but need access to liquid capital. This could be the capital you need for everyday life, it could be capital you want to use to trade spot or futures, or it could be capital you want to deploy to another Binance product like Binance Earn.
One reason you might do this is to avoid selling your spot assets and paying taxes on the sale. Another reason might be because you think the asset will go up and don’t want to convert and spend that asset on living expenses now. Another reason you might do this is to effectively leverage your existing capital to trade another asset (like you would do with margin trading).
Just keep in mind interest rates and liquidation risks when taking out a loan. The practicality of taking a loan should always be considered against current market conditions and the other funds you have available to cover your loan. Extreme market volatility could mean having to rush to save a loan from liquidation, and in the event you have to save your loan, it is always wise to have ample amounts of collateral on hand.
Enjoy your time in the crypto space. :)