Bitcoin Forum

I do some P2P lending and with the recent uptick in Bitcoin price something crossed my mind, how does this affect the rate of payback? Logically, anyone who uses the coin to convert to cash is going to have a harder time to pay it back. Of course, the opposite can be said for times where the price goes down.

My fear is that the price is going to go up now and this puts my loans at risk for default. Anyone have experience with this?

I think this depends greatly on the reputation of the borrower. It helps to communicate with the person you're lending money to and offer to make a deal if the price rises tremendously.
It would be even better to mention this before making the loan, rules for what happens if the price rises.

Any movement in either direction is going to cause some pain or inconvenience for someone. I don't really get why there's a loan market in the first place. It's a borderline guaranteed setup to create sadness somewhere along the line. The loans section makes for some occasionally gruesome reading. If it really has to be done then they should be locking it in using something like Coinapault, not depending on someone to take giant market moves on the chin.

The idea of a bitcoin loan scares the crap out of me. I wonder what happened to people who took loans out in the fall of 2013 before it went crazy. Even after all the falls it was still nowhere near where it started out.

uh, for loans that are made in bitcoin and those bitcoin are directly used to buy something i see no problem

instead for the standard loan that are converted in fait and returned back, they usual are for a short time fram 2-3 days

for the time being where the price is skyrocketing, i would avoid giving bitcoin to someone else, unless the first case is true

I see what everyone is saying and it's all good input. As to gentlemand's point, I believe the loan market exist just because of the ease of use versus traditional lending. With that of course comes the extra risks involved. I think it would be a lot easier to get a loan for something like christmas gifts from a lender versus a bank, especially for those who have poor credit or maxed out CC. Of course idk if those are the people I want to lend to either...

I personally am just trying to hold onto coins as long as I can so price dips won't affect me much. I just see it as an easier way to make some 'interest' on my coin. Plus if it's out of my hands I'm less likely to waste it.

I guess in a way it could function as a way to short the currency for people who believe it will crash.

In theory the only people who would really be hurt are the ones who loaned money when it was lower and had to pay out when it peaked. Because if you took a loan out at the top ~1,500 BTC and then the cost to pay back the loan was cut in half you would be grinning from ear to ear.

If you are loaning bitcoin, you are paying back in bitcoin.

If I were to make a loan (which I wouldn't btw), I would not want to end up with half the bitcoin as before just because the price doubled. I want my bitcoin plus the percentage at the end.

I'm accumulating bitcoin wealth, not fiat wealth. I don't care about the price of bitcoin at that point, I just want to end up with more bitcoins.

If the price were to go exponential again, you'd definitely see people defaulting and I'm sure that happened in 2013. That's why you always have to use collateral for loans.

Most borrowers do not convert bitcoin to fiat and then convert back to repay the loan. It takes too long to convert back and forth, leaving little time to actually "use" the money. Nevertheless, rising prices made it more tempting to default because they would get more fiat value out of it. Securing collateral is the only way for lenders to protect themselves. When bitcoin prices rises, you should raise collateral percentage in tandem.

I've seen people do loans for specific values in fiat, which could be useful if there is high volatility on the market.
It's different with loans on BTCjam though, I could definitely see more people defaulting if the price rises with 100 dollars or more...

The first rule in taking and giving money in loan is to have or give those in the currency in which you will use those and will earn from those. It is a big wrong to borrow bitcoin and then convert those in other currency (normally whatever be that money and whatever may be the possibility to earn), earn with this last currency and then convert in bitcoin and pay the rates. And this for a simple reason. No one can know how will go the value of each of the currencies. So you take another very big and impossible to be known risk when do such kind of borrowing: the going of the value of both currencies. To not speak here where it is spoken about bitcoin in such kind of relations. Everyone who know bitcoin know its volatility. With bitcoin is risky to take bitcoin and use as bitcoin (because of the high risk of investing or use of it with scammers which are to many in online opportunities because of the nature of this kind of business) and not to change it in other currency and to work with the other currency. Never must be made such thing.

If you are looking through cash-wise, the borrower will need to make more (give the loaners back more) than he thought he would.

To anyone confused, if I loan it is to be loaned back in BTC with interest based off the BTC.

So it would sound like the consensus is don't loan out to anyone who intendeds to use the funds outside of bitcoin itself, whether it buying something for themselves or investing?

You should be happy... You'll get more value in BTC if the BTC price rises.

I seriously think that there is nothing to worry about here, as it's the loanee's problem to pay back the loan, as long as they are legit and have a good credit history and you have their documents, you shouldn't have a problem.

Good luck with loaning in the future.

this option is available using btcjam. You always repay in btc but can choose the option on which it is paid (usd, btc). So you borrow 3 btc (priced at 300). Bitcoin rises to 350. You have the option when requesting loan to pay utilizing usd/btc/etc. So when you borrow at 3 btc at 300 you owe 900.

When its rises to 350 per btc, if you selected btc as payback you still pay back 3 btc but now it costs 1050. if you used usd at payback marker than you only owe 900$ in btc (2.57).

And vice versa if btc price crashes. hopes this makes sense. 

thats just the risk both the lender and borrower have to keep in mind when taking out or funding a loan. not much else to say about it, but i hear p2p lending sites like btcjam are notorious for their default rates anyways. its true that this may increase the risk off your loans defaulting, but i personally dont think those odds will change. people that intend to pay their loans back usually end up paying their loans back regardless of a little price fluctuation.

I use BTCpop which doesn't offer that. I would try btcjam becuase of that but I've only heard bad things...

I think that Bitcoin loans revolve more around fit value as opposed to Bitcoin value, since that is how it works from my experience anyways. I know that sites such as BTCJam use a fiat value system anyways, so I don't think anyone gets screwed aside from the value of the actual Bitcoin changing, which can be bad for lenders, good for borrowers, or vice versa. Just depends on the market.

In my opinion, thus everyone knows already bitcoin is really not stable.
it means it flactuates a lot. So when you loan in btc. in whichever amount
of it in that time. you should pay it also in btc. as it is the risk you take and the lender take.
and yeah.. it also depends if you talk good to the lender. as when price also goes down.
dont you think the lender also have risk? i experience same of this back then.
but ended still we agree on the original agreement as what we talk.

I don't really see how the price of Bitcoin effects bitcoin loans. I'm pretty sure that most people will charge the same amount of interest, regardless of the price.

Exactly. It also depends if the borrower is trustworthy or not. You just have to choose who you give loans to wisely. If you do this, there is a lower amount of risk.

It is not always bad for both parties. If borrowers spend the bitcoin directly, he has bitcoin incomes, like mining, job payment etc, he wouldn't lose anything from the increasing price of bitcoin. I know many bitcoin lenders have large chunk of bitcoin in hands. He lends out bitcoin and receives bitcoin interests. No matter bitcoin is up or down. He will still be happy to see the amount of bitcoin is increasing. The exception is that he is trading bitcoin and lose the opportunity of selling out bitcoin before the price goes down.

not really, most of the time the borrower on these p2p platforms arent repeat customers and dont have any reputation to go off of. lenders are only attracted by the high interest rates these [2[ lending sites charge. with little repercussions for defaulting, a lot of the borrowers end up defaulting.

IMO it is effecting the loan market a lot. Many borrowers are selling BTT accounts through requesting a loan.

you dont have to fear about that,your loan is tottaly safe,price movement should have been predicted by any market,and they can adapt with that situation,i never feel that before,just because i dont take any risk to get a loan.