By: Malana VanTyler
Owning Bitcoin once meant simply holding onto it and hoping for gains. Now, that same Bitcoin can unlock real-world value without being sold. Through a strategy known as Bitcoin loans, crypto holders can borrow against their digital assets. This option gives them quick access to cash while preserving their investment. Figure Lending LLC offers a simple way to tap into Bitcoin’s value without triggering a taxable sale.
Bitcoin Loans Explained
A Bitcoin loan is similar to a secured loan in traditional finance. However, instead of using your house or car as collateral, you use your Bitcoin. The concept is simple. You deposit your crypto with a lender. Based on the value of your deposit, you get a cash loan. Once you repay the loan and interest, the lender returns your Bitcoin.
The structure lets you maintain your crypto holdings while tapping into the cash value. It’s ideal for those who want short-term funds without selling off assets they believe will rise in value over time.
Why More People Are Turning to Bitcoin Loans
Bitcoin loans are gaining traction for a good reason. For one, you don’t have to give up ownership of your Bitcoin. In contrast to selling during a market dip or converting your crypto into fiat, you retain your position. As a result, you can benefit from future growth if the market rebounds.
There’s also a significant tax benefit. Selling Bitcoin can lead to a capital gains tax liability. By taking out a loan, you’re not technically selling the asset. This method allows you to sidestep that taxable event.
Additionally, you can get these loans fast without credit checks. Because your crypto serves as collateral for the loan, non-bank lenders approve you based on the value of your assets, not your credit score. This factor makes it a strong option for self-employed individuals, freelancers, or anyone who might find traditional loan applications challenging.
How People Are Using Bitcoin Loans
Use cases for Bitcoin-backed loans range from buying homes to managing business expenses. Are you a homeowner in need of quick cash for renovations or closing costs? If so, a crypto-backed loan, such as the one offered by Figure, can provide a solution that avoids the need to liquidate traditional investments.
Quickly assessing funds without going through banks can be a critical advantage for business owners or entrepreneurs. Bitcoin loans can also help consolidate high-interest debt. This strategy enables users to replace revolving debt with a fixed-rate loan backed by their crypto.
And what about the long-term holders (HODLers)? These individuals are committed to riding out the ups and downs of the market. For them, a Bitcoin loan is a way to participate in traditional financial activities without abandoning their crypto convictions.
What to Watch for Before Taking a Loan
Like any financial product, Bitcoin loans come with responsibilities. It’s essential to understand the loan-to-value (LTV) ratio. What if the value of your Bitcoin drops significantly during the term of the loan? You may be required to deposit additional collateral or risk having your assets liquidated.
Also, review the repayment terms closely. Be aware of the interest rate, payment schedule, and any penalties that may apply if payments are made late. The security of your Bitcoin is also critical, so choose a lender with transparent policies and a solid reputation.
Some platforms, including Figure Lending LLC, allow you to borrow against multiple crypto assets. This feature gives you flexibility and reduces risk by diversifying the collateral used.
A New Era of Financial Access
Bitcoin loans are transforming the way people perceive borrowing. Crypto holders can sidestep being locked out of traditional finance or forced to sell assets prematurely. Instead, they can turn their digital wealth into usable cash. This model levels the playing field for a growing segment of financially savvy individuals who want control over their assets and strategies.
If you believe in Bitcoin’s future but need liquidity today, Bitcoin loans offer a practical path forward. Whether managing cash flow, funding a project, or avoiding capital gains tax, this approach enables you to do it all without letting go of your crypto. As the demand for more flexible, digital asset-backed financial solutions grows, Bitcoin loans could be a key component of future global finance.
DISCLAIMER: No part of the article was written by The Signal editorial staff.
