Every crypto owner loves to earn passive income with their assets. But with the growth of the crypto industry, the number of scams has also increased. Therefore, it has become challenging to find the right investment strategy and the ways how to lend cryptocurrency to get the maximum profit with few risks. There are some legit ways to earn passive income with fewer risks in the crypto market, such as crypto lending. Let’s dig in to find more about crypto lending.
What is crypto lending?
Crypto lending is a type of Decentralized Finance through which crypto owners can lend their assets to different borrowers to earn interest payments. This interest payment is also called a crypto dividend. Lenders have the option to lend cryptocurrencies or stablecoins.
Crypto lending is an amazing investment opportunity because lenders do not lose ownership of their assets. Instead, they can easily earn passive income over their idle assets.
How does crypto lending work?
Let’s consider an example to understand how crypto lending works.
Suppose you are a happy owner of 5 Bitcoins. You want to earn passive income with these assets. You go to a crypto lending platform and deposit your cryptos on the platform. By doing so, you make your cryptos available for lending.
There comes a borrower who needs a loan. Crypto lending platform will go through his loan request. Upon approval, will lend your assets to that borrower after accepting collateral as security. The value of the collateral is always higher than the loan value.
You will start receiving interest payments on a weekly or monthly basis directly deposited into your account. The interest rate varies for crypto and stable coins. It can be 3% to 7% for cryptos, and for stablecoins, it can be as high as 17%.
When the lending period ends, you will get your cryptos and interest rates back. The borrower can only get back his collateral if he has paid the entire loan amount and the interest payment. Otherwise, the platform will sell the collateral to help you cover your loss.
This is all how crypto lending works.
Benefits of crypto lending
- As an investor, crypto lending allows you to earn passive income on your idle assets.
- Crypto lending does not require a lot of active involvement. The entire process happens through the platform. You earn hassle-free profit.
- You do not lose ownership of your assets.
- Crypto lending platforms help you recover the loss in case of loan default by selling the collateral.
Tips for successful crypto lending
Investment in the crypto industry comes with risks. But making careful decisions can help reduce these risks. The following are a few tips for successful and less-risky crypto lending.
- Your entire crypto lending experience depends on the crypto lending platform. Therefore. Always choose a reputable and famous platform.
- Always start with low investment. Once you are confident about crypto lending and the platform, you can invest more.
- Do not invest because of fear of missing out (FOMO). Instead, learn good enough about crypto lending and then start investing.
- Try to diversify your portfolio by investing in different cryptocurrencies.
- Set a profit and loss target so that you know in time when to stop.
- Focus on interest rate brackets when selecting a cryptocurrency for lending on a particular lending platform. Some platforms give special offers for a limited period. You can avail those to increase your profits.
Best crypto lending platforms
The following are among the best crypto lending platforms you can consider starting with.
|Platform||Annual Average Interest rate on Cryptos||Annual Average Interest rate on Stablecoins|
Figure: Top crypto lending platforms
Crypto lending provides a great investment opportunity for passive income with fewer risks. The number of returns depends on the cryptocurrency and lending platform you are using. Crypto lending platforms are either automated or manual. They work accordingly, as their names suggest. You can choose one as per your knowledge and experience. Moreover, being in the crypto investment sector, you must not take any step without doing your homework. Once you are sure, then do not hesitate to explore the crypto industry and its rewarding sectors.