Binance has announced that Binance Loans has started accepting AVAX and ADA tokens as collateral assets.
Binance Loans’ new Collateral assets (AVAX and ADA)
Binance Loans will now be accepting AVAX and ADA as collateral where they will provide loan orders that are backed by the two tokens so as to lower the borrowing cost.
However, Binance Loans also offers a number of cryptos as collateral assets, loanable limitations, and interest rates which depends on the internal risk mitigation and market situations.
Difference between Crypto Loans and traditional loans
Basically, Crypto loans and traditional loans depend on the same principle but the main difference between the two is how people account for their money. In traditional loans, credit ratings are used to determine the risks, but in crypto loans credit rates are irrelevant. Institutions can use traders’ crypto as collateral until the borrower repays the loan.
In Crypto Loans the period of repayment can be shorter than that of regular loans, for example, Binance Loans offers a loan term of about 7 to 180 days.
The risks involved in Crypto Loans
One of the risks involved in Crypto loans is the volatility of cryptos which makes them unstable as compared to normal currencies. For example, the value of crypto can drop making the collateral value of the lender less than that of the loan.
However, crypto loans may appeal to investors for a number of reasons as a number of traders might not consider liquidating their assets. Crypto loans can help traders to receive interest on their assets.
Besides, traders can use Bitcoin (BTC) to borrow USDT or BUSD as there is a high probability for the collateral value to increase and worth more than the loan. BTC value might rise to make some profits for the loan borrower.
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