How Crypto Loans Change the World of Finance


Crypto-backed loans are one of the hottest tools in FinTech at the moment, with their userbase and audience growing rapidly for several years. Both crypto fans and even those who have little knowledge of the technology have been paying attention. This is essentially because they are changing the way people interact with money on a large scale. Here are some of the ways crypto loans are changing finance as we know it:


Unbanked individuals can gain loans


People who are unbanked, meaning they are ignored or dismissed by traditional financial corporations such as banks, are now able to access loans, so long as they have crypto that they can use as collateral. This might not sound like much, but loans are an instrumental part of life, with many people needing them to help with milestones in their lives such as gaining their first home, or going to university. However, not everybody can access traditional loans because they have poor (or no) credit ratings, or because they have no access to banks. And this is not just a small group of people who fall into this category, it is around two billion people worldwide. Despite being avoided by banks and traditional loan providers, all of these people are able to get some form of crypto loan, so long as they have the collateral to back it. Crypto loans give these people the tools they need to live more comfortably and pursue their goals with more ease than before.


Credit scores are becoming obsolete


Credit scores and ratings are such an omnipresent part of adult living that we often assume their existence is necessary, but crypto loans prove this is not the case. The VAST majority of crypto loan providers do not require a credit score or rating of any sort, effectively proving that credit scores are obsolete. In traditional finance, a credit score is used to determine many parts of your life, including whether you should be given a loan, or even whether you should be given a job, but the fact that loans can exist without them proves that they are an unnecessary (and unfair) feature of current-day banking. Expect credit scores to lose their significance more and more as crypto loans gain more recognition.


Crypto loans help the crypto market grow


One of the biggest issues with the crypto industry as it currently stands is that a great deal of people hold huge amounts of wealth in crypto, but simply cannot use it without trading for fiat as most companies and governments do not treat it as real money. In the past, this forced people to liquidate their positions and acquire fiat cash so they could do things like pay bills, buy goods, and overall survive. This is likely to change in the future when crypto gets accepted on a mass scale, but until then crypto loans are the perfect solution. They allow people to keep their positions in their respective coins and tokens by using that as collateral and borrowing fiat. Then, when their loan comes to an end, they can pay fiat back to get their crypto, and all through this they never actually lose their position in the market. During a loan, people still own their coins and tokens, and so they are never converted to fiat. Because of this, it means that the market can keep growing, as there are now less people selling their coins and tokens for fiat, helping the numbers and adoption grow.