A lot of bitcoin backed collateral loans being offered

[Chibit01]

https://x.com/binance/status/2100223565421240740

Plenty of things worth buying.

Very few worth selling your BTC for.

With Lite Loan, borrow up to 1,000 USDT using your BTC as collateral. No price-triggered liquidation in the first 30 days.

0.5% promotional fee for a limited time

I stumbled upon these ad on X today, which was also reposted by CZ, about using your bitcoin in your exchange balance (which is, in the first place, it's wrong to hold bitcoin in an exchange balance) to borrow a pegged dollar which you can spend. According to the ads there is no interest attached to it which sounds strange to me, 0.5% fee don't seem to be convincing enough as what they will only take from the clients.

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

[BABY SHOES]

Why do loans with bitcoin collateral, is it not better to hold than to borrow or store on the exchange?

Moreover, the purpose is to buy goods, which can be valued very kosumtif if you buy unnecessary goods.

All right... Ads from Binance will always be highlighted because this is a big exchange and then reposted by CZ which has a lot of followers so anyone can believe in it even though it offers very low fees.

I would not do anything on the exchange except to trade only occasionally.

[Dogedegen]

https://x.com/binance/status/2100223565421240740

Plenty of things worth buying.

Very few worth selling your BTC for.

With Lite Loan, borrow up to 1,000 USDT using your BTC as collateral. No price-triggered liquidation in the first 30 days.

0.5% promotional fee for a limited time

I stumbled upon these ad on X today, which was also reposted by CZ, about using your bitcoin in your exchange balance (which is, in the first place, it's wrong to hold bitcoin in an exchange balance) to borrow a pegged dollar which you can spend. According to the ads there is no interest attached to it which sounds strange to me, 0.5% fee don't seem to be convincing enough as what they will only take from the clients.

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

This is a strange thing to see because this is not a new concept. The issues with Bitcoin loans were of risk of the company that is being used, which is eliminated here if it is offered by Binance. The other main issues were high interest rates compared to traditional loan, often it was more than 10%. And lastly that the loan to value was often quite low, sometimes even 50%. So until competition improves the offering of Bitcoin loans, I do not see them as a good option at this time. But see if you read from the website:

What is Binance Lite Loan?
Binance Lite Loan is a fixed-term lending product that allows users to pledge collateral and borrow cryptocurrency for instant liquidity. The pledged collateral is used to subscribe to Simple Earn Flexible Products and earn yield (where available and subject to applicable rates).
Key features:
1. Fixed loan term: 30 days
2. Borrow amount: starting from $1 equivalent of cryptocurrencies, capped at the borrowing limit for each asset
3. Liquidation during the initial 30-day term is not triggered by price fluctuations in the collateral or borrowed asset
For more information, please refer to the FAQ.

These are 30 day loan, so to simulate a one year loan with interest rate you would lose 6% in service fees which you could consider similar to interest. So while it is an improvement compared to the competitors and the offer is a bit different, it is still not that great.

Why do loans with bitcoin collateral, is it not better to hold than to borrow or store on the exchange?

Loans are not compared to holding. Loans which are made with Bitcoin collateral are compared to selling, and they are better than selling if the terms are good.

I would not do anything on the exchange except to trade only occasionally.

Binance is one of the good and reputable players in the space, it is not needed to cast bad doubt on them.

[JiiBs]

https://x.com/binance/status/2100223565421240740

Plenty of things worth buying.
Very few worth selling your BTC for.
With Lite Loan, borrow up to 1,000 USDT using your BTC as collateral. No price-triggered liquidation in the first 30 days.
0.5% promotional fee for a limited time

I stumbled upon these ad on X today, which was also reposted by CZ, about using your bitcoin in your exchange balance (which is, in the first place, it's wrong to hold bitcoin in an exchange balance) to borrow a pegged dollar which you can spend.

When it gets constructive like we have in the lines “0.5% promotional fee for limited time”, you already know it’s just one way to spice the proposal up to get people into taking them on their offer. Surely the fee wouldn’t remain at 0.5%, you’ve got only 30days before price liquidation gets triggered and while some might feel that’s not a long time, it wouldn’t take any time for the day to come.

Mind you, they would have succeeded not in making you get loans but also, in leaving your Bitcoin on an exchange which is a win for them as well.

They got one thing right though, you don’t have to sell your Bitcoins just to buy what ever comes to mind.

[jossiel]

Why do loans with bitcoin collateral, is it not better to hold than to borrow or store on the exchange?

When you hold it, you get to keep the bitcoin. But loans =! holding.

Someone who's desperately in need of cash and only has bitcoin remaining as his personal savings, the only way to solve that problem is to either sell it and with this option, to borrow against it and use it as a collateral.

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

Just get the idea of the typical banks loaning people and the interest rates they give, there's more to what is actually shown for the numbers and its interest.

You're giving yourself two problems when you do that, you pay the interest and then make them hold your BTC.

[DabsPoorVersion]

I stumbled upon these ad on X today, which was also reposted by CZ, about using your bitcoin in your exchange balance (which is, in the first place, it's wrong to hold bitcoin in an exchange balance) to borrow a pegged dollar which you can spend. According to the ads there is no interest attached to it which sounds strange to me, 0.5% fee don't seem to be convincing enough as what they will only take from the clients.

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

Holding Bitcoin in an exchange = WRONG

But if you are in a tight situation where you really needed upfront money, there’s no one available to lend you money, you have no credit cards and seems you’ve already exhausted all other options, selling your BTC is never an option for you, then this could be the only one you have left.

Regarding the Ads showing that there's no interest attached, it's just a way to attract more people.
But if you will read the whole Terms and FAQs, the "no interest" offer works the same as using a credit card. You only have 30 days term, and you have to pay it on or before the due date.

Here is more info.

The maximum overdue period is 30 days, during which penalty interest will accrue daily.

Risks and the interest rate here,

What are the risks?
If the loan is not fully repaid by the due date, a penalty interest will accrue daily on the outstanding balance at a simple annual rate of 36%.
Liquidation may be triggered in any of the following scenarios, including but not limited to:
a. The loan has been overdue for 30 days; or

b. Following expiry of the initial term, the LTV reaches the Liquidation LTV of 91%.

[Alphakilo]

If this ad was posted on my country board I would have advised anyone willing to try it out due to desperation could first try out loan apps and face the charges square on, because I don't believe anything offered for free is actually free mostly on an exchange.
Centralized exchanges are in the business for profit making and would do so both to attract new customers and have possession of old customers coins if they falter on the TOS.
The ad also didn't make mention of what might be the case Incase of a market crash or when someone misses the deadline because that should be enough reason to put into the equation when considering such an offer.

[Decimation]

According to the ads there is no interest attached to it which sounds strange to me, 0.5% fee don't seem to be convincing enough as what they will only take from the clients.

Since CZ has made the post, there is no chance of it being a scam. Although no one would take a loan in this way unless they were in a lot of trouble. Actually, on one hand it seems positive but on the other hand it doesn't seem positive.

But if someone has Bitcoin as collateral and there is no other way to take a loan as a last resort, by paying a 0.5% fee, it will be possible to take a loan by keeping Bitcoin as collateral.

[X-ray]

Bitcoin is liquid, market open 24/7 and honestly i'm more surprised that there's still not more bitcoin backed collateral loans.

Volatility is no excuse because securities-backed loans exist and they're just as volatile if not more.

But if you actually want bitcoin backed collateral loan this isn't interesting offer, the charge 0.5% on principal while Bybit loan with hourly interest charge nothing.

The 30-day no price trigger liquidation is interesting only if you are those kind of people maxed out initial LTV.

The offer is not that great.

[Darker45]

Bitcoin-backed loan is apparently a growing business. If you observe, this is offered not only by Bitcoin-related platforms but even by traditional banking and financial giants. Even Goldman Sachs, JPMorgan Chase, among others are also accepting Bitcoin as collateral for huge loans. This only means that Bitcoin is now being treated as a valuable asset.

But I don't like it when loan offers are obviously preying on small Bitcoin owners. You're right, these offers are traps. With misleading, fuzzy, yet catching marketing lines, many small-time investors, who are mostly lazy enough to carefully read and understand the terms and conditions, will easily fall for it. Little do they know they're actually letting go of their precious Sats at a loss.

[notocactus]

https://x.com/binance/status/2100223565421240740

With Lite Loan, borrow up to 1,000 USDT using your BTC as collateral.

Lite Loan  
$1,000 is a very big fund with many people, not a lite fund.

No price-triggered liquidation in the first 30 days.

Sounds good but there are hidden risks.

about using your bitcoin in your exchange balance (which is, in the first place, it's wrong to hold bitcoin in an exchange balance)

Even funding your exchange accounts with bitcoin is risky after you broadcasting the deposit transaction. After it is confirmed, at least one confirmation, bitcoin sent to the exchange wallet, and you already lost control of it. Then there is risk of losing your bitcoin forever because you will never control what will happen with that exchange and how they treat users including you.

Reminder: do not keep your money in online accounts.

to borrow a pegged dollar which you can spend. According to the ads there is no interest attached to it which sounds strange to me, 0.5% fee don't seem to be convincing enough as what they will only take from the clients.

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

It's helpful for people who are ready to take risk, and need extra money to use for something. Surely with such people, they need loans, and they will find as best loan offers as possible.

With careful people, who consider their bitcoin safety, financial safety first, will control themselves, reduce needs, and avoid making loans with any collateral from bitcoin to real estates.

[Dave1]

Yeah, it could be a trap and this exchanges are taking advantage of Bitcoin enthusiast who they think might take advantage of it. And at the end of the day if they can't pay then, their collateral will be absorb by them.

So it's not a trick anymore, banks have used this kind of strategy for decades already. And so some exchange just copied this trick. But hopefully though, our logical mind will tell us not to go fancy on those exchanges that offer this kind of services as once you bite on it, chances are, you are going to lose.

It's better to accumulate in your own phase, save it and HODL.

[boyptc]

0.5% promotional fee for a limited time

That's not promotional fee, that's an upfront fee and it's the service fee.

You haven't even got the entire loan and you're already deducted with that. It's likely the processing fee that the banks also offer.

Someone who's going to apply and be qualified for it, 40% of your collateral is what you're most likely going to get.

Assuming a borrowing limit of 1,000 USDT and a collateral ratio of 40%:
Collateral worth 6,000 USDT, borrow quota: 6,000 × 40% = 2,400, capped at 1,000 USDT
Collateral worth 2,000 USDT, borrow quota: 2,000 × 40% = 800 USDT

Is it really lite? maybe for those who are in need of exact $1k if they have more than that valuation in BTC but that's business. Others might have missed one important detail, maximum of $1K USDT only.

Say you took the loan and eligible for the max cap of $1k.

$5(0.5%) was already deducted just for the processing(service) fee.

[GreatArkansas]

0.5% promotional fee for a limited time

That's not promotional fee, that's an upfront fee and it's the service fee.

You haven't even got the entire loan and you're already deducted with that. It's likely the processing fee that the banks also offer.

Someone who's going to apply and be qualified for it, 40% of your collateral is what you're most likely going to get.

Assuming a borrowing limit of 1,000 USDT and a collateral ratio of 40%:
Collateral worth 6,000 USDT, borrow quota: 6,000 × 40% = 2,400, capped at 1,000 USDT
Collateral worth 2,000 USDT, borrow quota: 2,000 × 40% = 800 USDT

Is it really lite? maybe for those who are in need of exact $1k if they have more than that valuation in BTC but that's business. Others might have missed one important detail, maximum of $1K USDT only.

Say you took the loan and eligible for the max cap of $1k.

$5(0.5%) was already deducted just for the processing(service) fee.

They seem to be just changing the term on "fee", well, trying to be something cool in this market, we can't blame them. They market it soft but fee already hit before you even use the USDT.
But I think this is depends on each use cases, especially if you need like emergency loan or you need cash immedaitely and dont want to sell your Bitcoin, you can avail this.
But for me, I rather sell a bit of Bitcoin if I need cash, than put collateral back on an exchange. Not your keys still apply once that BTC sit there.

[hd49728]

They seem to be just changing the term on "fee", well, trying to be something cool in this market, we can't blame them. They market it soft but fee already hit before you even use the USDT.
But I think this is depends on each use cases, especially if you need like emergency loan or you need cash immedaitely and dont want to sell your Bitcoin, you can avail this.
But for me, I rather sell a bit of Bitcoin if I need cash, than put collateral back on an exchange. Not your keys still apply once that BTC sit there.

I would rather sell my bitcoin to have cash for emergency than make a loan despite of any loan interest I will have to pay. Because making a loan will cost me extra money, and a bigger risk is losing my collateral (bitcoin in this discussion).

Especially if the cash amount I need does not require me to sell all my bitcoin, I feel it's comfortable to sell a part of my bitcoin fund for cash and emergency, because I can work and earn cash later, then use cash to buy bitcoin again.

I would like to have a safer approach for my finance, avoid extra cost, while I always can buy bitcoin again after resolving my emergency situation.

[iBaba]

~~~

Before I even use something like this I would like to understand what exactly happens after the promotion time and what condition they can liquidate the bitcoin because the major danger to me is that convenience can make people borrow more than what they need and getting USDT instantly against BTC can just feel like free liquidity to them.

They can easily forget that they are borrowing against an asset they might have spent years accumulating and when bitcoin drops the amount borrowed would still remain the same, but the value of the collateral of the loan has reduced. I don’t really care much about 0.5% fee but what happens after those 30 days, temporary suspension of price triggered liquidation for a limited period sounds attractive but does not make the loan safe if the loan becomes unsustainable to maintain overtime.

[pooya87]

All these bitcoin collateral loans appear more like a trap to me set by the centralized exchange than offering actual help.

The exchange is not there to help anyone. It is a business that is made to make money for its owners and offering loans to gamblers (those who trade altcoins and tokens on a highly risky centralized exchange) is one of the easiest way they can make more money without risking anything themselves! It's a win-win situation for them since if the gambler fails to pay back, they win big by taking all their collateral which was bigger than the loan amount and if the gambler does pay back they still win since they are still getting the lent money back + interest.

[Outhue]

I remember loansharks in my country, most of them are exposed later, they never wanted their customers to refund the money they took so that they can actually go for the collateral, some people use expensive properties and so on, somehow later they lost their lives and some don't even know what happened because they ended up in more debt, unable to pay what they own, many victim woke up after everything tuned late, now I can't compare this to crypto loans, but still I believe that it's not safe to use your Bitcoin as collateral for any loans online or anywhere, something can go wrong, the exchange can get hacked, the platform can turned to scam, your Bitcoin is no more in your care but on the hands of the exchange or platform, if loan is something you like it's better to use something else as collateral not Bitcoin.

[Peanutswar]

For those who really need a money I guess they are willing to let go their bitcoin well this could depends on the person how they will use the money of course. If you will use the money for a good day such as help you to avoid getting suffer and at least you know to yourself that you have the capability to pay there is nothing wrong with that but if not imagine you got a good position of your bitcoins and ended up losing because you cant pay your loan. In this type of collateral for sure they will lock your bitcoin until the maturity date or even fully paid so still you cant hold your bitcoin you need to deposit that into their platform.

[348Judah]

Snipped

There is nothing worth giving your bitcoin for, even if you are rest by an urgent need, I will not suggest that you stick your Bitcoin for any collateral assets, when you have your bitcoin you have your freedom and control over it and at the same time can be profitable as long as you keep holding it, assign a particular amount of your coins on other portfolio unit have in order for it to serve as your decisional backup coins for any urgent use than depending on collateral assets loans.