Gibraltar-based Xapo Bank has announced a service offering loans up to $1 million using Bitcoin as collateral. This allows customers to obtain loans without selling their Bitcoin, using digital currency as security.
Features of Bitcoin-Backed Loans
Xapo Bank offers its clients the chance to retain their Bitcoin while obtaining loans of up to $1 million, without any additional fees. The interest rate is around 10%, meaning a $1 million loan will require a repayment of $1.1 million. Loan terms offered include 30, 90, 180, and 365 days.
Repayment Terms
Xapo Bank stores the Bitcoin used as collateral in its vault. Once the loan is repaid, the Bitcoin is returned to the owner. The bank offers automated repayment options and a real-time monitoring feature with their Loan Health Tracker. There are no penalties for early repayment of Bitcoin-backed loans.
Prospects and Risks
Considering the long-term appreciation potential of Bitcoin and the potential weakening of the USD due to inflation, such loans might be attractive to long-term bitcoin holders. Xapo Bank provides 20% or 40% loan-to-value ratio safeguards, minimizing liquidation risk in case of Bitcoin price drops.
Xapo Bank is extending opportunities for Bitcoin owners by offering flexible loan terms secured by cryptocurrency. However, it's essential to consider the associated risks and carefully evaluate all aspects before opting for this financial service.
