“Lending Out Coins Could Earn Crypto Owners Interest”

 

If you are looking to earn passive income while holding coins, crypto lending is a worthwhile option.

 

This is an alternative investment method in which investors lend either fiat money or cryptocurrencies to other borrowers. In exchange, they will receive interest payments. If you consider yourself to be a crypto investor, then crypto lending can offer immediate returns. The best part is that there is no need for you to sell any coins.

 

To some, this deal may sound too good to be real. Most – if not all – of the best high-yield savings accounts pay considerably less interest, and crypto lending is admittedly a riskier way of holding your savings. It is difficult to guarantee returns when it comes to crypto, so to be safe, there are some things you need to remember.

 

Different loans and wisely choosing an exchange

 

It is important to note that not every cryptocurrency exchange allows you to lend out your crypto. No two exchanges are alike, so interest rates tend to vary depending on what the loan type is or what coin you are loaning out.

 

Generally speaking, exchanges offer two types of loans: fixed and flexible.

 

  • Fixed: This type of lending is very similar to a bank CD (certificate of deposit) in that it locks in your deposit at a prearranged rate for an established period of time, usually 7 to 90 days. For not doing anything with your crypto, the reward is a payment of higher interest.
  • Flexible: This type of lending is a lot like a savings account. You can withdraw your crypto whenever you want to, but the catch is that the return rates are significantly lower.

 

When it comes to exchanges, knowing that your funds are safe and secure is important. Every exchange follows different guidelines, with the primary one being the Know Your Client/Customer (KYC) rule. This protocol verifies the identities of customers and downsizes criminal activity. Customers residing in the U.S. might be at risk of getting their accounts shut down on exchanges that do not adhere to KYC rules.

 

Selecting the right coins

 

Even though there are over 9,000 cryptocurrencies on the market, a majority of exchanges only permit users to lend a fraction of them; a few dozen, give or take. The question that remains is which of these many coins should you lend? Well, that ultimately depends on your risk tolerance, desired returns, and the conditions of the market.