Loans in BTC

[hibr3d]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

Thats the most important thing in loaning BTC. What would happen if you lend $30 worth BTC and after 90 days you get not $33, but instead you get $23.

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[BTCreward]

bitcoin is not the right currency for loans.

I don't know if another alt currency would work or not, but any bitcoin loans would have to take place outside the blockchain and be done by contract.

I don't want BTC to replace fiat anyway, but rather compliment it.

I also think that any loans in bitcoin are risky. btc is a non-reversible currency by nature. If someone does not want to return the loan, what are you going to do?

Take their collateral

Gold isn't particularly reversible either, but there was a time when all loans were denominated in gold.

If someone were to be able to give up collateral in exchange for a loan then why would they need the loan in the first place?

WTF?

Because they want money but they don't want to give up their asset permanently, obviously? Because they want to buy something else? You know, the reason for any loan ever? Just with a limit equal to the borrowers total equity?

Moreover why would a person take A loan if he had money in his account to be reversed away in the case of non payment???

When most people take out loans that are secured by collateral the collateral is something that is not liquid and something that is used on a regular basis, like a car for example.

The collateral used in BTC loans is liquid (can easily be converted into BTC otherwise it would not be accepted) and the collateral is not used by the borrower - it is generally held by escrow. In essence borrowers are giving up control of cash in exchange for different cash and they need to repay the lender plus interest.

There would be no reason why the borrower couldn't simply sell the collateral then repurchase when they would be able to repay the loan instead of borrowing and paying interest

[Xch4ng3]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

Thats the most important thing in loaning BTC. What would happen if you lend $30 worth BTC and after 90 days you get not $33, but instead you get $23.

I loan you $30 in BTC.
After 90 days you pay me $31 in BTC.

Obviously the lender would have been better off holding the coins and probably made more profit if the price had gone up but I think pegging the price to USD is more attractive as I don't think anyone wants to end up in a situation where they borrow say 10 BTC and suddenly the price increases by 10x leaving the borrower stuck.

[GrandmaJean]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

btc jam is very similar to sites like prosper except that prosper will hire a collection agency for you while btcjam will make you collect yourself if the borrower doesn't pay

[Ron~Popeil]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

btc jam is very similar to sites like prosper except that prosper will hire a collection agency for you while btcjam will make you collect yourself if the borrower doesn't pay

I looked into them and they are quite similar to the Prosper model. I made some money with Prosper but I am much more risk averse about my bit coin than I am about fiat currency.

[Danel_L]

Safello explores problems and possibilities with bitcoin P2P lending. https://blog.safello.com/index.php/2014/07/21/bitcoin-peer-peer-lending/

[Harley997]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

btc jam is very similar to sites like prosper except that prosper will hire a collection agency for you while btcjam will make you collect yourself if the borrower doesn't pay

I looked into them and they are quite similar to the Prosper model. I made some money with Prosper but I am much more risk averse about my bit coin than I am about fiat currency.

I am in the same boat as you. Another concern of mine is that most of my money that I made from Prosper was from loans made at the height of the financial crisis when interest rates were spiking even for credit worthy borrowers and the economy was in the tank, I was lucky that the economy recovered, allowing my borrowers to mostly pay back their high interest rate loans in full.

[coinits]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

I lend btc on there . I have made a few loans and have been burned once. You can choose to borrow with btc pegged to US dollar or not. As a lender you determine if you want to lend to a pegged loan or not. Reputation loans are a quick turnaround. Some borrowers will do multiple rep builders. After 1-3 loans with a quick payback seem to be the safest for later loans.

[blumangroup]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

I lend btc on there . I have made a few loans and have been burned once. You can choose to borrow with btc pegged to US dollar or not. As a lender you determine if you want to lend to a pegged loan or not. Reputation loans are a quick turnaround. Some borrowers will do multiple rep builders. After 1-3 loans with a quick payback seem to be the safest for later loans.

Rep loans don't have any purpose other then to gain trust of the community and to make their risk profile look better. I argue that these kinds of loans are very unethical.

[sandykho47]

I think loans in BTC is very risky 
people can just get the BTC and run away
expect you know them in real life 

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

I lend btc on there . I have made a few loans and have been burned once. You can choose to borrow with btc pegged to US dollar or not. As a lender you determine if you want to lend to a pegged loan or not. Reputation loans are a quick turnaround. Some borrowers will do multiple rep builders. After 1-3 loans with a quick payback seem to be the safest for later loans.

I think it's still risky

[InwardContour]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

I lend btc on there . I have made a few loans and have been burned once. You can choose to borrow with btc pegged to US dollar or not. As a lender you determine if you want to lend to a pegged loan or not. Reputation loans are a quick turnaround. Some borrowers will do multiple rep builders. After 1-3 loans with a quick payback seem to be the safest for later loans.

Reading what happened in the past in the loan section of the forum, I would never risk a loan with my precious bitcoins.
The probability to be scammed is high and the revenues are too little, I'll stay away from that business.

[Mobius]

BTCjam.com has been doing loans in BTC for awhile where people can do peer to peer lending.   I have never tried it before, and I was just reading how someone made off with a bunch of investor money...but that is always the risk of lending...

Thing is BTCJam only does soft credit checking, it's not actually pulling regulated information to asses someone's risk when being loaned money. If BTCJam teamed up with someone like Experian who offer business services they could reduce a lot of time spent checking IDs, get a more reliable credit score and they even include debt recovery.

The downside to this is that people will bad credit will never be able to get a loan, even if they really can afford to pay it back.

Also the BTC would have to be pegged to USD to avoid problems with fluctuation.

I lend btc on there . I have made a few loans and have been burned once. You can choose to borrow with btc pegged to US dollar or not. As a lender you determine if you want to lend to a pegged loan or not. Reputation loans are a quick turnaround. Some borrowers will do multiple rep builders. After 1-3 loans with a quick payback seem to be the safest for later loans.

Reading what happened in the past in the loan section of the forum, I would never risk a loan with my precious bitcoins.
The probability to be scammed is high and the revenues are too little, I'll stay away from that business.

You need to require collateral to be safe lending BTC on the lending subforum. It is also generally safe to lend small amounts to users who have established accounts (full members or higher) with neutral trust as long as the amount lent is less then what can be made in a month at the lowest paying signature campaign for ~50-100 posts as your could get a trusted member to negative trust someone that defaults on a loan.

[Ltsknnr]

There is no reason why fractional reserve banking could not be done with bitcoins. After all, it existed when the U.S. was on the Gold Standard.

It can't be done with bitcoin, because you cannot produce more bitcoins like you can dollar bills...And when the banks have to fufill the loan, they will have to send actual bitcoins to fund the loan....

Person A deposits 100 BTC. The bank A loans 90 BTC to person B.
Person B deposits 90 BTC. The bank B loans 81 BTC to person C.
Person C deposits 81 BTC. The bank C loans 72 BTC to person D.
Person D deposits 72 BTC. ...

Total apparent number of bitcoins in the system: 1000

That's classic fractional reserve banking and it works with dollars, bitcoins, gold, or seashells.

Incorrect.

If that were true we wouldn't have such an extreme increase in the money supply, national debt, and inflation. The way the Fed and banks in the US works is this:

Person A deposits 100. The bank then creates on book 900 to use for loans and credit=1000 Bam, money created out of thin air.

The banks do this for every deposit that is made, and new money is created "on book" for the additional 9/10s of the fractional reserve rule. This is what results in the highly compounding increase in the money supply. In reality, the actual physical money supply that exists couldn't even pay off the interest on the outstanding national debt.

[polynesia]

Incorrect.

If that were true we wouldn't have such an extreme increase in the money supply, national debt, and inflation. The way the Fed and banks in the US works is this:

Person A deposits 100. The bank then creates on book 900 to use for loans and credit=1000 Bam, money created out of thin air.

The banks do this for every deposit that is made, and new money is created "on book" for the additional 9/10s of the fractional reserve rule. This is what results in the highly compounding increase in the money supply. In reality, the actual physical money supply that exists couldn't even pay off the interest on the outstanding national debt.

From an accounting point of view, if they create 1000 loans for every 100 deposit, what is the liability corresponding to the loan of 1000 (which appears on the asset side)?

[blumangroup]

Incorrect.

If that were true we wouldn't have such an extreme increase in the money supply, national debt, and inflation. The way the Fed and banks in the US works is this:

Person A deposits 100. The bank then creates on book 900 to use for loans and credit=1000 Bam, money created out of thin air.

The banks do this for every deposit that is made, and new money is created "on book" for the additional 9/10s of the fractional reserve rule. This is what results in the highly compounding increase in the money supply. In reality, the actual physical money supply that exists couldn't even pay off the interest on the outstanding national debt.

From an accounting point of view, if they create 1000 loans for every 100 deposit, what is the liability corresponding to the loan of 1000 (which appears on the asset side)?

Banks can leverage their equity in a 10:1 ratio. For every $1 their customers have on deposit, a bank will have a liability of $1.00. For every $1 that the bank loans, the bank will have $1 in assets (before accounting for loan loss protection).

[twiifm]

From an accounting point of view, if they create 1000 loans for every 100 deposit, what is the liability corresponding to the loan of 1000 (which appears on the asset side)?

Both sides of balance sheet is expanded.   Read this article it explains more correctly than the posters here

http://www.cnbc.com/id/100497710

[polynesia]

Both sides of balance sheet is expanded.   Read this article it explains more correctly than the posters here

http://www.cnbc.com/id/100497710

Aah... Thought so.
Many people have misunderstood the leveraging bit.

[odolvlobo]

There is no reason why fractional reserve banking could not be done with bitcoins. After all, it existed when the U.S. was on the Gold Standard.

It can't be done with bitcoin, because you cannot produce more bitcoins like you can dollar bills...And when the banks have to fufill the loan, they will have to send actual bitcoins to fund the loan....

Person A deposits 100 BTC. The bank A loans 90 BTC to person B.
Person B deposits 90 BTC. The bank B loans 81 BTC to person C.
Person C deposits 81 BTC. The bank C loans 72 BTC to person D.
Person D deposits 72 BTC. ...

Total apparent number of bitcoins in the system: 1000

That's classic fractional reserve banking and it works with dollars, bitcoins, gold, or seashells.

Incorrect.

If that were true we wouldn't have such an extreme increase in the money supply, national debt, and inflation. The way the Fed and banks in the US works is this:
Person A deposits 100. The bank then creates on book 900 to use for loans and credit=1000 Bam, money created out of thin air.
The banks do this for every deposit that is made, and new money is created "on book" for the additional 9/10s of the fractional reserve rule. This is what results in the highly compounding increase in the money supply. In reality, the actual physical money supply that exists couldn't even pay off the interest on the outstanding national debt.

My explanation is a simplification that doesn't include inter-bank lending and the details of the accounting. The result is the same.

[tee-rex]

deflation is terrible for loans.  If you borrow 1 BTC and have to pay back 1.25 BTC (due to interest) plus the price of house goes down due to deflation.  You'll always be losing money.  Its only good for the lenders

Loans by definition must always lose money...

Lol

Anyway, if you're borrowing BTC, when the exchange rate settles, the interest rates will likely be lower than if the currency was constantly being inflated. It won't be 0%, but it will likely be quite low.

Loans do not always lose money, but when the price of the unit of measure goes up it hurts the borrower and helps the lender in terms of fiat.

Generally speaking it is not a good idea to borrow in bitcoin unless you plan on using your borrowed funds to pay for some income generating asset that will generate bitcoins.

Actually, it doesn't make much difference whether you borrow in a depreciating currency (fiat) or an appreciating one (Bitcoin). What really makes all the difference is the real interest you pay on a loan since in both cases you pay more later than you borrow today in inflation-deflation adjusted prices.

[Mobius]

deflation is terrible for loans.  If you borrow 1 BTC and have to pay back 1.25 BTC (due to interest) plus the price of house goes down due to deflation.  You'll always be losing money.  Its only good for the lenders

Loans by definition must always lose money...

Lol

Anyway, if you're borrowing BTC, when the exchange rate settles, the interest rates will likely be lower than if the currency was constantly being inflated. It won't be 0%, but it will likely be quite low.

Loans do not always lose money, but when the price of the unit of measure goes up it hurts the borrower and helps the lender in terms of fiat.

Generally speaking it is not a good idea to borrow in bitcoin unless you plan on using your borrowed funds to pay for some income generating asset that will generate bitcoins.

Actually, it doesn't make much difference whether you borrow in a depreciating currency (fiat) or an appreciating one (Bitcoin). What really makes all the difference is the real interest you pay on a loan since in both cases you pay more later than you borrow today in inflation-deflation adjusted prices.

It really does matter. If you borrow in something other then the kind of income it will produce then you are going to have an exchange rate risk. This is true for all types of assets. For example if you borrow dollars so you can build/invest in something that will produce gold then you will risk that the price of gold in terms of dollars will fall. The same is true with bitcoin; if you borrow bitcoin for something that will produce dollars, you take the risk that bitcoin will rise in value in relation to dollars.