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What is a bitcoin loan?

A bitcoin-backed loan lets you borrow cash using your bitcoin as collateral. Instead of selling your bitcoin, you pledge it to secure the loan and receive funds you can use for any purpose. When the loan is repaid, your collateral is returned to you.

How It Works

  1. You pledge bitcoin as collateral. The amount of bitcoin required depends on the size of your loan and the loan-to-value (LTV) ratio.
  2. You receive your loan funds. Funds are sent to your verified bank account.
  3. You make monthly interest payments. Payment details, due dates, and your outstanding balance are available in your loan dashboard.
  4. You repay the loan. Once the loan principal and any outstanding interest are repaid, your bitcoin collateral is returned.

What Is Loan-to-Value (LTV)?

LTV is the ratio of your loan amount to the value of your bitcoin collateral. For example, a $50,000 loan backed by $100,000 of bitcoin has a 50% LTV.

Because bitcoin's price changes constantly, your LTV changes too. If the price of bitcoin falls, your LTV rises. If your LTV rises above the thresholds in your loan agreement, you may need to add collateral or make a payment to bring it back down.

Why Borrowers Use Bitcoin-Backed Loans

  • Access cash without selling bitcoin. You keep your bitcoin position while unlocking liquidity.
  • No credit-based qualification. The loan is secured by your collateral rather than your credit history.
  • Speed. Because the loan is secured by collateral, funding is typically faster than traditional lending.

Whether a bitcoin-backed loan is right for you depends on your individual circumstances. Selling versus borrowing can have different tax implications, and we recommend speaking with a qualified tax or financial professional before borrowing.

Key Risks to Understand

  • Liquidation risk. If bitcoin's price falls significantly and your LTV exceeds the limits in your loan agreement, or if required payments are not made, some or all of your collateral may be liquidated to cover the loan.
  • Price volatility. Bitcoin's price can move quickly. Monitoring your LTV in your loan dashboard helps you act before a liquidation threshold is reached.
  • Late payment fees. Missed payments accrue additional interest and can lead to liquidation. See our Monthly Loan Payments article for details.

Questions?

If you have questions about how bitcoin-backed loans work or whether you are eligible, reach out to our support team at help@team.casa. We are happy to walk you through the details.