This post is also available in: Deutsch (German)
Even if you are not (yet) into crypto, I’d suggest to read the whoe article and decide at the end if you would like to check it out. To invest with Coinloan you don’t need any cryptocurrency. You can lend Euros and other fiat currencies (although the EUR loans seem to be the place to be). Of course it is also possible to borrow money on the marketplace, but I will not go into this. We are here to earn money, not paying interest ;).
Basics of Coinloan
The platform is founded in Estonia (Talinn) and the core team lives there according to their statement. They have some more employees in 3 other countries. Investing is possible for every person of at least 18 years of age and have a residence within Europe. Even most countries over the world are accepted with some exceptions, sadly currently I do not know which, but I guess USA investors are not welcome. Registry is quick and smooth as is the identification process (you need to upload some ID document). Further you will need a 2fa app for authorization. In this case google authenticator is a good choice. This is like getting a entry code on your sms, in this case you just get it on the app.
How does investing work actually ?
Rationally speaking Coinloan is a normal p2p marketplace like you are used to. Main differences in my view are: 1) You are lending directly to a person (original p2p concept) and do not buy securitized loans from an originator. 2) The loan is secured by a crypto currency deposit (which theoretically has a value). 3) You can set the loan terms according to your wishes (interest rate, duration and more). Point 1 is debatable, but correct when comparing with the big platforms like Mintos, Peerberry, Grupeer etc..
After your verification is processed you are allowed to deposit your Euros via bank wirement (SEPA) to your Coinloan wallet. The details for this you can get in your Coinloan dashboard at “my wallet”. There are more ways to fund your account, like using a credit card. But these possibilities are subject to additional costs. Furthermore my bank wirement was deposited the same day, so I do not see the need for different funding ways. Withdrawals will cost you depending on the way you are using (SEPA = 2 Euro), this just for your information.
As soon as your deposit is confirmed on the marketplace, you can put your own loan offers out there (button LEND), or accept available loan requests. Minimal loan amount is set to 100 Euro. Interest rate, duration and amortization method (interest only = monthly interest payments and principal at the end / interest + principal = annuity). In case of early redemption, the borrower has to cover the interest for the whole duration, which can be very lucrative for investors. Imagine you get 6 months of interest after 3 months or so. An important detail you need to consider when placing a loan offer is what crypto currency you allow as security for your loan. As standard all six currencies are available. They are ok to me, except for CLT (coinloan token), I personally deactivate them. Currently it seems like you can get easy loans in the 15 to 16 percent range. I tried it with 17 percent, but it took longer and was only taken once by a borrower. At 20 percent none of my loans was taken. You can check the recent loans tab to see which loans went through last to get an idea. You can set your loan amount variable. If you have 1’000 Euro to lend you can add 10 loans at 100 Euro or set the limit from 100 to 1000 Euro in one loan. The borrower can choose then what amount to pick up. Saves time, but you are also allowed to add 10 loans. Adding loans is free of charge, as everything on the platform for the lender, except low withdrawal fees. This is a snapshot of the loan setup mask.
What about the risks?
As often we here speak about a relatively new marketplace which is only running for serveral months. The securities behind the loans are deposits of crypto currencies, which are volatile and barely regulated (if even). The LTV (loan to value ratio) is set at 70%. This means for a borrower to get 100 Euro loaned, he has to deposit crypto assets worth circa 143 Euro (100 / 70 = 1.428). As long as the LTV is below 92%, nothing happens. If the LTV climbs above 92 percent, which means that the value of the deposit sunk, the crypto deposit gets liquidated to assure the lenders money is save. So worst case might be ltv slowly reaches 91 percent and then within minutes the crypto market plunges 15 percent or more. If Coinloan is fast enough, and able because of market conditions, to close the loan fast enough remains to be seen. As of now it seems that the platform’s risk management worked perfectly. I just wanted to tell you a possible risk.
As a borrower, why does it make sense to take a loan against a crypto asset which you are holding? Imagine you have 1 Bitcoin and need money. You could sell it and have liquidity, but you think that the Bitcoin price will increase in the future and maybe double. If this scenario becomes reality, the borrower won, because his deposit is worth far more and he can cover even the interest rate with the value increase. That might be the underlying thinking process, but that is just an additional information from me, if you are new to these types of loans.
I like the idea of Coinloan and can see the use case. Further you know exactly what lies behind a loan. That is more than you know in most other cases, except maybe property loans. The biggest question is: are you comfortable taking cryptos as security for your loans? I can answer this question for me with yes, but I understand if people see this different. If you want to check prices and volatiliy of cryptos you can check with www.coinmarketcap.com for example. The level of interest rates and the freedom to set my own conditions make this platform worth using for me. Follow me to Coinloan.
Questions? Keep them coming. Regards p2phero