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Using crypto for cashflow: 3 ways crypto-backed AUD loans can benefit borrowers


Crypto-backed AUD loans offer borrowers a range of different opportunities. We take a look at some of the features you may not have known about.

SPONSORED by Block Earner. From November 2023, Block Earner will offer crypto-backed loans that are paid out in AUD to borrowers. To find out more about crypto-backed loans, visit Block Earner online today.

Over the last decade or so, cryptocurrencies have emerged as an alternative to trading in traditional investment classes.

However, the ways to leverage them for better cash flow haven't always been obvious – aside from buying low and selling high, of course.

Learn more about crypto-backed loans with Block Earner

πŸ‘‹ Hey there! As this article is sponsored by Block Earner, we'll be using some examples from its products in this article. But always compare your options and do your research. Crypto-backed loans are high-risk financial products, and it's possible that you may lose the crypto you have offered as security if you fail to make repayments. Additionally, make sure that you also read the Credit Guide, Risk Disclosure and Target Market Determination ("TMD") on the Block Earner website before signing up for any financial product.

This has been compounded by volatility in the crypto market over the last year or so. Though the market has shown some signs of recovery in recent months, many crypto values still haven't returned to pre-2022 levels and the state of the crypto market continues to be highly volatile. This means there is a high risk of unexpected and potentially significant losses instead of anticipated returns.

Accordingly, getting liquidity from crypto can be particularly tricky when your buy price is higher than the current price – as you don't want to realise your losses.

Crypto-backed loans are changing this. Crypto-backed loans allow you to use crypto as security for a loan in Australian dollars (AUD), while you still keep exposure to the potential upside of your crypto assets.

To point to one example, Block Earner provides cash loans in AUD. The borrower's crypto is used as security.

Learn more about crypto-backed loans with Block Earner

For borrowers, crypto-backed loans are a way to secure finance and open up cash flow.

Block Earner offers a maximum loan amount based on a loan-to-value ratio (LVR) of 33%. A repayment notice will be triggered if the LVR ratio rises to 55%. Additionally, if the borrower does not reduce the LVR to below 50%, then Block Earner will commence default proceedings.1

Crypto-backed loans can offer crypto owners a range of opportunities, and be used for a range of different purposes. Today, we'll take a look at some of them.

However, it's important to note that they come with risks, and shouldn't be approached lightly.

1. They can be applied to a range of borrowing purposes

Crypto doesn't have to be a dormant asset.

Crypto-backed loans – such as those offered by Block Earner – allow you to use your crypto as security for a loan that's paid out in AUD.

As with traditional loans, funds secured through crypto-backed loans can be used for a number of different purposes.

For some crypto owners, it's a means of combating rises in the cost of living – using assets to achieve larger lifestyle goals.

Increased liquidity, housing, vehicles, securing business opportunities and further investments are some of the most common reasons people opt for crypto-backed loans.

Block Earner loans also allow you to pay back on an instalment basis or at the end of a previously agreed period of time.

πŸͺ™Crypto-backed loan must-know! Block Earner's loan-to-value ratio (LVR) is 33%. This is so that Block Earner is able to take a conservative approve and provide customers with protection against large market moves.

2. Secure holding for your crypto

When you take out a crypto-backed loan in AUD, you need to deposit your crypto with the lender.

This – not unreasonably – can be a point of concern for borrowers, given the amount of exchanges that have gone bust or been hacked in the last few years.

Transparency from your lender is crucial. So make sure you only work with lenders that can provide you with evidence of the following:

  • Effective cybersecurity procedures for loss and theft prevention.
  • Clarity around your crypto being returned after the loan has been repaid.
  • Good customer reviews.
πŸͺ™Crypto-backed loan must-know! Before you apply for any loan, make sure that your chosen lender has all the regulatory licences and authorisations required by Australian law and regulation to loan funds to you.

3. An alternative means of securing finance

If you don't fit the traditional borrowing mould, securing finance can be tricky at times.

For example, you may be a contractor who's paid on an irregular basis in comparison to those working more traditional 9-5 roles.

Alternatively, you may be asset-rich but looking to free up additional cash flow.

None of these factors necessarily mean that you're unable to repay a loan. But they can make it more tricky to secure a loan through conventional lenders.

However, crypto-backed loans can represent a potential alternative for borrowers.

With Block Earner, Ethereum-backed loans cost 4.95% p.a. (comparison rate^ 6.06%), while Bitcoin-backed loans cost 6.95% p.a. (comparison rate^ 8.11%)

πŸͺ™Crypto-backed loan must-know! The types of crypto accepted as security will vary from lender to lender. There tends to be a greater focus on stablecoins and established cryptocurrencies (e.g. Bitcoin and Ethereum) to avoid the risks associated with more volatile types of cryptocurrency.

Crypto-backed loans can offer benefits to a range of different crypto owners.

If you have a non-traditional income stream or are looking to capitalise on your assets, crypto-backed loans can allow you to source finance in AUD.

This can be an alternative form of accessing funds that might not otherwise be available.

With this said, crypto-backed loans are broadly considered high-risk. It's important to be aware of the risks involved before taking out a loan.

All the rules associated with more traditional loans still apply.

Don't borrow more than you can afford, make sure you're able to make repayments and make sure there are favourable repayment terms.

Before opting for a crypto-backed loan, make sure that you're making an informed decision.

Learn more about crypto-backed loans with Block Earner

Block Earner Disclaimer
Approved applicants only. Terms, conditions, fees and charges apply. *The rate provided above is indicative and your rate may be different based on a variety of factors, including your credit worthiness. Rates are subject to change. Loans made by Web3 Loans Pty Ltd ACN 668 516 952 and managed by Web3 Ventures Pty Ltd trading as Block Earner (ACN 655 090 869) authorised representative 551024 of Mortgage Direct Pty Limited ACN 075 721 434 Australian Credit Licence 391876.

^Comparison Rate
The comparison rates are based on a secured loan of $10,000 over a term of 3 years. The comparison rate provided includes a 1% origination fee applicable to all loans, this is applied to the balance owing upon successful application. WARNING: This comparison rate is true only for the example given and may not include all fees and charges. Different terms, fees or other loan amounts might result in a different comparison rate.

Learn more about crypto-backed loans with Block Earner

SPONSORED by Block Earner. From November 2023, Block Earner will offer crypto-backed loans that are paid out in AUD to borrowers. To find out more about crypto-backed loans, visit Block Earner online today.

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