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Author Topic: Why do you borrow bitcoins?  (Read 2124 times)
finkleshnorts
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September 16, 2012, 12:53:06 AM
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And why at such high rates?

I can't picture myself ever taking out a bitcoin loan, at least not until it's a household currency. Am I missing something?

I don't think "I have income denominated in bitcoin" is a very good answer, either.
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September 16, 2012, 01:00:06 AM
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I haven't taken out a single BTC loan. The reason behind that being, I trust myself to make my payments back in a timely manner or however agreed upon, but what I don't trust, is that the price of BTC wont take a 300% shift during that time screwing me out of hundreds, maybe even thousands of dollars. I think its just too easy to fall in over your head with a Bitcoin loan, because even someone with the best of intentions, may have access to the $1,000 they owe now, but in three months, will they have access to the $5,000 they now owe? That 5% interest rate may seem nice at $10/week, but what happens when it ramps up to $50/week, and keeps compounding on top of that?

TLDR: I stay the hell out of Bitcoin loans because I don't know what I'll owe the person I borrow from tomorrow.
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September 16, 2012, 01:17:11 AM
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I've never taken a loan but given once. I think some people just want a few coins to purchase something but they have no means to instantly get them. While waiting for the money to arrive at an exchange, they get the loan and take the chance to get burned by volatility. If you have a way to get them instantly with, say, up to 5% commission, I don't think borrowing even for a few days would be worth the risk.
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September 16, 2012, 02:07:35 AM
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I usually have the Bitcoins, When i borrow its because I forgot to account for conversion fees when purchasing the item that i want, so at most I only borrow 1-2 BTC here and there
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September 16, 2012, 05:54:46 AM
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I don't think "I have income denominated in bitcoin" is a very good answer, either.

Do you consider trading on margin to be a loan?  Some do.

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September 16, 2012, 06:01:35 AM
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Quote
I don't think "I have income denominated in bitcoin" is a very good answer, either.

That's pretty much the only good reason I can think of.

If you wanted to be roughly neutral and were working for a company who promised bitcoins on completion and you fully trust them you might borrow to hedge that. I really doubt it would be worth it at the rates around here, but if you've got to make rent or whatever it could be wise.

Borrowing coins is usually a terrible mistake imo.

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September 16, 2012, 06:08:07 AM
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It would make more sense to borrow fiat against bitcon collateral but at that point its cheaper to get a credit card. The risk of people defaulting is just too great to offer bitcoin loans to anyone imo.

finkleshnorts
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September 16, 2012, 06:13:06 AM
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I don't think "I have income denominated in bitcoin" is a very good answer, either.

Do you consider trading on margin to be a loan?  Some do.


Yes, but I think shorting bitcoins is generally a bad idea.
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September 17, 2012, 01:59:36 AM
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Maybe a service like SatoshiDICE would need a loan. They've been thousands of coins in the red before. A loan would enable them to raise their max bets and absorb temporary losses.

I recommend asking me for a signature from my GPG key before doing a trade. I will NEVER deny such a request.
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September 17, 2012, 12:52:46 PM
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I've asked for a loan before as I'm 15, so I can't get a credit card and as in my country there's currency exchange control, it's a hassle to get dollars. Of course, I calculate first the amount I can repay by mining and leave a safety margin to avoid being late.
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September 17, 2012, 01:09:10 PM
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Well I can think of a one reason, if you need to buy something with bitcoins, but can't change fiat to bitcoins right away for some reason. Or you want to use local bitcoins for exchanging, but you live in an area with not great amount of bitcoin users, so it will take some time for offer to appear to exchange fiat for bitcoins with minimum fees in local area.

tl;dr See Xenland's reply.

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