How to use a crypto-backed loan

If you need access to a loan, you’re probably considering the lineup of traditional options like credit cards, personal loans, business loans, and home equity options. They all base your ability to borrow off of your income, credit, and possibly your assets. But one option that isn’t as widely-talked about is a crypto-backed loan. It’s a new way to borrow that doesn’t factor in your credit and income as no personal guarantee is required. Instead, it’s a loan simply secured by your crypto assets. So how can you use a crypto-backed loan from lenders like SALT?

10 ways to use a crypto-backed loan

1. Pay off credit card debt

Credit cards have a place in our economy and can help you rack up rewards, but with interest rates up to 29%, they aren’t typically the best option for carrying balances. Crypto-backed loans, on the other hand, give borrowers a flexible way to access lump sums of cash with interest rates starting as low as 5.95%.

If you have crypto, you can get a crypto-backed loan and use the proceeds to pay off high-interest credit card balances, consolidating them into one payment and potentially lowering your cumulative interest rate.

2. Make a large purchase

Whether you’ve been planning to make a purchase for a while, or an emergency popped up and took you by surprise, the proceeds of a crypto-backed loan can help you cover it. For example, say you want to take a family vacation to Hawaii. Instead of putting the flight and all the trip expenses on a credit card, you can take out a crypto-backed loan and then pay for everything in cash. This can help you avoid higher interest rates and any negative impact on your credit score.

3. Home renovations and improvement projects

From a burst water pipe to an unexpected HVAC repair, homeownership can be expensive. While it’s advised to have a rainy-day fund just for these occasions, even the best savers may find the final bill just out of reach. You may also feel reluctant to drain your emergency savings account to put your house back in order. A crypto-backed loan can quickly get you the cash you need.

4. Paying off medical debt

If you’re still opening bills every month thanks to that one time you broke your arm ten years ago, you are not alone. About 32% of American workers have medical debt and more than half have defaulted on it. Medical debt can be crippling to an otherwise healthy budget, and with payments lower than with other types of financing, it can take years and years to pay off.

A crypto-backed loan may be just what you need to get that hospital or clinic to stop calling, and it’s often much cheaper than putting all of that debt on credit cards. Further, if your personal credit is maxed out, a crypto-backed loan can open up a new avenue of borrowing for you.

5. Planning a wedding

Even if you don’t want to spend too much on your big day, the average wedding in the US costs just shy of $40,000. From the dress and the venue to the flowers and catering, many expenses add up. Temporarily trading your crypto for cash can help you cover the big day without digging into savings or driving up your credit utilization. Cash payments to vendors can also sometimes get you a discount on services, giving you yet another reason to consider grabbing that crypto-backed loan before saying, “I do.”

6. Buying a house or real estate

Have you considered buying a property outright without the hassle or extra fees of a mortgage? A crypto-backed loan may be just the ticket to closing on that house deal. You’ll also be at an advantage as a cash buyer in an increasingly tight housing market; the seller may be more than happy to give you the deal since there are no additional lender hoops for either party to jump through. Cash obtained from a SALT loan is also free of those “extra” charges, such as loan origination fees.

7. Starting a business

Even the simplest online businesses have startup costs. A crypto-backed loan can help pay for the costs like forming an LLC, building a website, and getting your first product manufactured. Don’t let another year pass with the excuse that you just don’t have the funds. If you have crypto assets, this can be the year you get your dream business going.

8. Upgrading mining equipment for mining operations or individual miners

Crypto miners have to evolve to survive, and that means investing in the latest, most powerful equipment. Being that you’re already involved in the crypto sphere, crypto-backed loans are a natural choice that can help you stay competitive and get every coin you can. Plus, it’s an investment that can help you not only pay off your loan and get your crypto back but also earn more.

9. Fund ongoing operational business costs

While new businesses benefit from getting a funding jump-start, existing companies can often use a little extra cash flow too. Whether you want to hire new employees, invest in marketing, expand your product offerings, or something else, business owners of all types are turning to crypto-backed loans to diversify their borrowing and take advantage of low rates through short-term loans.

10. Reinvest or trade crypto

Serious crypto investors often need fiat to acquire more crypto. A crypto-backed loan that gives them access to cash can help them do so. With the crypto markets showing promise, and the rates on SALT loans very low, it’s easy to see how smart investors can make the numbers work in their favor to expand their crypto enterprises.

SALT crypto-backed loans: Flexible funds with no personal guarantee

Whether you only need a few thousand dollars or a large lump sum, SALT loans can give you access to $5,000 or more in USD or Stablecoin. Secure your loan easily, with a single crypto asset, or through a combination of SALT-approved currencies. You’ll always know how your assets are doing, as SALT’s secure system and unparalleled customer support ensure that you can check in on your assets at any time. There’s no credit check needed, either. Once you deposit your collateral assets onto the SALT platform, you’ll be well on your way to getting the cash you need for whatever move you want to make.

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SALT Stabilization: How it Works

I’ve Been Stabilized. What’s Next?

When your Loan-to-Value ratio (LTV) exceeds 90.91%, we stabilize your loan by converting all of your volatile assets into stablecoin (USDC).

At this point, you will notice that your USDC wallet reflects the total US Dollar value of your combined portfolio. Each collateral wallet balance will show $0. Don’t panic!

How Do I Convert Back to My Original Assets?

To get your original assets back, you will need to manage your LTV and restore the health of your loan to a safe state (83.33% LTV or lower). To do this, follow these steps.

Navigate to the Loan Status page or click “Manage LTV” in the notification module on the dashboard.

2. Manage your LTV by either depositing more crypto or making a one-time payment in the Manage LTV Module.

  1. We recommend curing your LTV to a healthy state (<70%), but as long as you have managed it to 83.3% or below, you will be eligible to convert.
  2. Navigate back to the Loan Status Page. You will see that your LTV has dropped, but you are still being held in Stabilization Mode.
  1. In the Manage LTV module, you will notice that you are now eligible to convert. Click “Convert Now” to convert back to your original assets or to a mix of any assets we accept as collateral.
  1. The convert tool will default to the percentages of your original collateral mix. You may edit this and convert back to a different collateral mix if you’d like.
  2. Click “Next” to review the details of your conversion and then click “Convert Now” to confirm. Once confirmed, you will have successfully reverted back to your asset mix of choice.

Still have questions about stabilization?

Please call our support team at +1 (720) 575–2272.

Legal Notice: Please be sure to review your Loan Agreement for additional information. The liquidation or conversion of pledged assets could result in adverse tax consequences. You should consult your tax advisor in order to fully understand the implications associated with pledging digital assets as loan collateral. Notwithstanding a general policy of giving you notice of margin deficiency, we are not obligated to do so. We may convert or liquidate pledged assets in your account without notice to you to ensure that minimum maintenance requirements are satisfied. If Salt Lending sells or converts some or all of your assets, such transactions made on your pledged collateral assets are accepted or rejected in Salt Lending’s sole discretion and may be at prices higher or lower than your initial acquisition cost. In the event of a liquidation or conversion, Salt Lending may choose to sell some or all of your assets to an affiliate of Salt Lending at applicable market rates.

New Changes Add Value for SALT Supporters

After identifying and evaluating new ways to add value for SALT Membership Unit (“SALT”) supporters, we’re excited to announce that we’re 1. now accepting SALT as collateral for a cash or stablecoin loan and 2. switching from a staking model to a redemption model.

How will this work when the price of SALT varies across exchanges?

Since Binance and Bittrex delisted SALT in February and May respectively, we’ve been searching for a valid third-party pricing source by which to value SALT. We define valid exchange pricing as the trading price on an unmanipulated market where the trading volume is high enough that a sufficient number of buyers and sellers can establish a price at which to transact. We determined that Binance and Bittrex were the only two exchanges to offer a sufficient market for SALT to provide validity in the previous year. To mitigate this change in pricing validity, we have taken the 60-day moving average from Coinmarketcap.com, using the 60 days prior to the delisting announcement by Bittrex. Using this pricing mechanism, we are recognizing a price of $0.15 per SALT on our platform. If, in the future, SALT is listed on an exchange with adequate trading volume, accessibility, and market depth to provide us with price validity, we will immediately recognize such third-party pricing.

What does this mean if I’ve already staked SALT to secure a loan?

If you currently have a loan with us and you staked SALT to get a reduced interest rate, your SALT will automatically be recognized as collateral in your collateral wallet and your interest rate will remain the same.

What else can I do with my SALT?

We are moving from a staking model to a redemption model. This means that while you can still use your SALT to secure a lower APR on your crypto-backed loan, the new redemption program will allow you to redeem your SALT rather than stake it. The reason we’ve switched to this new model is to offer you value for your SALT upfront. From now on, you can redeem your SALT to reduce your interest rate for lower monthly payments (go to saltlending.com for loan terms and options). The amount of SALT required to do so depends upon the size of your loan.

What if I don’t own SALT?

If you don’t own SALT, these changes will not impact you. Our goal with switching to a redemption model and adding SALT as a collateral type is to reward early supporters of SALT by offering them additional ways to use their SALT tokens the way they were intended to be used — to engage with our lending platform.

Loan to Value (LTV) Explained

When you apply for a traditional loan, the lender uses your credit score, as reported by third-party credit agencies, to determine your credit worthiness or financial “reputation.” The higher your credit score, the lower the risk. To offset your credit score or in some cases even completely remove it from the equation, you can apply for an asset-backed loan. With this type of loan, you can offer up your assets — anything from your house or car to your stock portfolio — as collateral to act as “insurance” for the lender. In asset-backed lending, borrowers typically secure loans for an amount that’s less than the total value of the collateral.

The measurement of the balance of the loan relative to the value of the collateral asset is represented as loan-to-value or LTV. For example, you may have a loan for $320,000 for a home that is valued at $400,000, in which case your loan is 80% of the total value of the home.

As an asset-backed lender, one of the things that makes SALT unique is that we don’t even look at your credit score. With a SALT loan when you have collateral — whether you’re unbanked, haven’t accumulated credit, or have poor credit — you can still get a loan. Instead, SALT uses loan-to-value of your collateral to assign risk. As LTV is a measure of risk, the lower the LTV, the lower the risk for the lender (and therefore the lower the interest rate for the borrower).

How is LTV calculated?

Good question.

LTV is calculated as the loan amount in USD divided by the value of the collateral in USD, expressed as a percentage.

As an example, if you have a current loan balance of $100,000 and your total collateral asset balance is $200,000, you have an LTV of 50%. To make things easier, we’ve added an LTV Helper to the borrower portal that illustrates exactly how the LTV is calculated. See below.

Understanding LTV and how it’s calculated is essential to making an informed decision about your loan terms. Liquidation events benefit no one, which is why we provide the tools like our automated notification system to help you avoid them. Before you apply for a loan, you should ask yourself:

Once you answer these questions, you can choose the LTV that’s right for you.

Starting LTV

When you are taking out a loan against your crypto assets with SALT, you presently have 3 options for your starting LTV; 30%, 40% and 50%. The starting LTV will determine approximately how much (in terms of dollars) of the crypto asset you will need for that loan.

From the example above, for a $100,000 loan, you would need $200,000 in Bitcoin, Ether, Doge, or Litecoin to secure the 50% LTV loan option. For a 40% LTV, it would be $250,000 and for 30% LTV, it would be approximately $333,333.

Using LTV as a measure of risk, the 30% LTV option is the lowest risk.

Why is a lower LTV seen as less risk?

As the LTV goes up, the value of the underlying asset goes down. In the case of a crypto asset-backed loan, the value of Bitcoin, Ether, Litecoin, or Doge is trending down.

If the price of the crypto asset falls too low, the LTV will continue to increase. As it approaches 100%, there is a threshold where the collateralized asset will be sold to pay back the loan. This is known as the liquidation threshold. This threshold can vary from business to business and loan to loan.

For our example, let’s say the liquidation threshold is set to a 90% LTV.

When the LTV ratio reaches 90%, the crypto asset will be sold to reduce the LTV back down.

Timeout. Liquidations!?!

At SALT, we pride ourselves in having a robust notification system that relays important account activity to borrowers via our portal, text, phone calls, and emails. We give you control of how you want to be notified about each activity. You can be notified of everything from deposits and withdrawals to LTV warning thresholds.

As a borrower, you always have the option to transfer more collateral at any time.

Back to LTVs.

Why does this matter?

As you might be aware, the price of Bitcoin (or any crypto asset) can move up and down. As the price moves up, your LTV goes down. As the price moves down, your LTV goes up.

To build on our earlier example of a $100,000 loan with a 50% LTV, let’s use Bitcoin as the underlying crypto asset. In this example, let’s use $4,000 as the US dollar price of 1 Bitcoin.

Loan Amount = $100,000

Starting LTV = 50%

Price of 1 Bitcoin = $4,000

Doing the math $200,000/$4,000, you would need approximately 50.00 BTC to get a $100,000 loan with a 50% starting LTV.

Bringing it all together!

From above, assuming the liquidation threshold is set at 90% LTV, the price of 1 Bitcoin would need to go all the way down to approximately $2,222 to raise the LTV up to the liquidation threshold of 90% LTV.

A $100,000 loan with a starting LTV of 40%, would require 62.50 BTC at a price of $4,000 per Bitcoin. However, the 90% liquidation threshold would not be reached until the price of 1 Bitcoin went down to approximately $1,778.

Repeating the example with a 30% LTV, you would need 83.33 BTC at a price of $4,000 per Bitcoin and would reach the 90% liquidation threshold when the price of 1 Bitcoin was approximately $1,333.

STABILIZE IT

Today we’re proud to announce a partnership with CENTRE Consortium to accept USD Coin (USDC) as collateral.

A product of a collaborative effort between, Coinbase, Circle, and the CENTRE Consortium, USDC is a new stablecoin backed by the US dollar. According to Coinbase, “One USDC is a 1:1 representation of a US dollar on the Ethereum blockchain” and “each USDC is 100% collateralized by a corresponding USD held in accounts subject to regular public reporting of reserves.” From a credibility standpoint, Circle has partnered with accounting firm Grant Thornton LLP to conduct monthly audits of US dollar reserves backing the number of USDC tokens in circulation.

Why add USDC?

We’re constantly evaluating and analyzing new collateral options to determine how a given collateral will benefit our customers. Typically, we base our decision to add a new collateral type on a number of factors including the voting feature on our borrower portal. In this case however, we deliberately chose to add USDC in direct response to the market volatility we’ve recently experienced.

When there’s volatility in the market, it directly impacts your LTV, which can result in an undesired loss of collateral. We’ve heard your feedback regarding the need for transfer options that can be implemented on nights, weekends, and holidays. We’re adding USDC to the mix because we want you to keep your crypto, markets don’t.

By adding USDC we’re providing a quick, easy way for you to stabilize your LTV when there’s a rapid drop in the market. Given it’s backed by the US dollar but isn’t wholly tied to the U.S. banking system, you can transfer USDC as collateral at any point in time to bring your LTV back down. Now, rather than waiting for the bank to open to lower your LTV with a wire transfer, you can take immediate action when you notice your collateral is declining in value due to market volatility.

With the addition of USDC, SALT now offers loans backed by Bitcoin, Litecoin, Ethereum, DOGE, and USDC — you can secure a loan backed 100 percent by a single collateral type or combine them in a way that works for you.

Interested in applying for a loan? Sign up here. Or visit saltlending.com to learn more about SALT’s offerings.

Read more about the USDC Ecosystem.

Pass the SALT, Grow Your Wallet

Love SALT? Tell your friends about us! Many of you have already been spreading the word about SALT and have helped us grow our community (Thank you!). That’s why starting today, we’re offering $50 in Bitcoin to you and your friends when they take out a Blockchain-Backed Loan™.

How does it work exactly? Like this:

Step 1: Log in to your SALT account to access your unique referral code

Step 2: Share it with the world

If you don’t already have an account, sign up today to get your code and start growing your wallet.

Just share your code or link with your friends via email or use the hashtag #PassTheSALT to share it with your Twitter community — as soon as someone achieves an active loan status using your referral code, you’ll both receive $50 in Bitcoin from SALT. It’s that simple.

Our Two Satoshis on the 10th Anniversary of Bitcoin

Ten years ago today Satoshi Nakamoto announced his vision to change the world. This vision came via the Bitcoin White paper, which defined Bitcoin as “A purely peer-to-peer version of electronic cash would allow online payments to be sent directly from one party to another without going through a financial institution.” Since the publishing of the white paper, Bitcoin has completely revolutionized the way we think about the world — not only in how the world works today, but in how it can work in the future.

As we acknowledge the tenth anniversary of Satoshi’s white paper, we at SALT are proud to not only be contributors to the blockchain space, but to be among those working to advance the capabilities of humanity via blockchain. Ten years later and Satoshi’s work is still inspiring people throughout the world — it’s the catalyst for individuals and companies to find new ways of addressing challenges with global finance, real estate, and healthcare, to tracking everything from global food supply, to votes to donations. It’s not just a new technology but a new way of thinking — and one thing’s for sure — SALT wouldn’t exist without it.

To commemorate this moment in time, we spoke with SALT’s team and clients about what Bitcoin means to them, how it’s impacted their lives, and how it’s changed the world. Here’s what they had to say: