Bitcoin is a decentralised digital currency that works without a single administrator or central bank. It can be transferred between users on the peer-to-peer bitcoin network without the need for any external intervention from intermediaries. Coinbase is an American company that works as a platform for the exchange of cryptocurrency.
Now, Coinbase is allowing its customers to borrow cash by using Bitcoin as collateral. People might need to borrow cash for personal reasons that be very urgent, such as home repairs or medical bills. Previously, they might have sold their Bitcoin to cover the expenses, and depending on their situation, may have incurred either a taxable gain or loss. But now, you no longer have to do this.
Firstly, you should avoid selling any of your Bitcoin, as doing so can result in either a taxable gain or loss. You can borrow cash from Coinbase instead of opting to sell your Bitcoin.
There are no fees or credit checks involved, but there a low APR of 7.9%. The repayment schedule is very flexible, as there are no due dates. You can pay off the balance that is present on your line of credit on a schedule that is convenient for you. However, note that additional terms do apply. You can also get cash really quickly, as the cash that you have borrowed can be immediately deposited to PayPal or transferred via ACH into your bank account.
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How the process works
- Choose what you want to borrow. You are allowed to borrow as much as 40% of the value of the Bitcoin in your account, which totals up to $100,000.
- Receive your borrowed cash. You can use either your bank account or PayPal to get access to your borrowed cash quickly with no extra fees.
- Make payments every month. Each month, you are only required to pay the interest due, which is a minimum of $10 min. Pay off the balance when you are prepared to so. Additional terms and conditions will apply.
- The Bitcoin that you use as collateral will remain safely held by Coinbase. It will not be lent out or used for any other purposes.
Big news for BTC hodlers …
We’re expanding the number of states where US customers can borrow cash using Bitcoin as collateral. Eligible customers can now borrow up to 40% of their BTC holdings in cash without having to sell.
— Coinbase (@coinbase) June 9, 2021
Some important things to note
- The size and terms of the line of credit may depend on the value of your BTC collateral and the state that you live in.
- The APR has been made effective as of 1 June 2021. The value of APR is variable and is based on the Overnight Bank Funding Rate, as well as a margin.