Digital assets have enormous potential to reshape the existing financial system and create a more democratised and transparent economy. As we transition to this future world of finance, integrating cryptocurrencies and decentralised finance with more traditional forms of finance will be critical. LODA is the first lending platform that allows borrowers to obtain a personal or business loan using their crypto-assets as collateral. Let’s learn more in this article.
Perhaps more than in any other asset class the narrative of buy and hold resonates strongest with cryptocurrency investors. This has long posed a challenge for cryptocurrency holders who may be confident in the long-term value of their cryptocurrency but find themselves needing access to cash.
Loda solves this challenge as the first lender in Australia to give access to fiat currency loans at an ultra-competitive interest rate without having to sell down any crypto holdings.
Introducing crypto-collaterised loans
Loda works by allowing users to put up their cryptocurrency as collateral to open an instant credit line.
In other words, holders of cryptocurrency can access a traditional credit facility to improve cash flow or fund investment opportunities without needing to draw down or sell their cryptocurrency portfolios.
Loda currently offers either personal or business loans from $2,500 up to $250,000 with an LVR of 50%. This means if you have $100,000 in collateral (that is, crypto assets in any one of the nine accepted coins) you will be able to open a line of credit up to $50,000.
As we know, the price of cryptocurrencies can be volatile, so Loda works closely with customers to actively monitor and notify borrowers if the collateral value versus the money loaned deteriorates and needs to be managed. Should the value of the cryptocurrency held as collateral fall by more than 40% borrowers will be called to either pay off some of the loan or add additional collateral.
The benefits of crypto-backed loans
The initial benefit is obvious – holders of cryptocurrencies can access a line of credit without selling their holdings.
This not only enables crypto holders to continue to benefit from any capital growth of their crypto, but also ensures they do not trigger any potentially expensive tax liabilities as they continue to maintain ownership of the underlying crypto collateral.
Users are effectively being offered a line of credit which traditionally would have been access via loan against a house or increasingly (as seen in the US), against a share portfolio. Loda is simply introducing a new form of collateral into the Australian financial landscape.
The interest rate also makes it more attractive than taking out a personal loan. Loda charges a flat interest rate of 5% p.a. There are no origination fees, no administration fees and no other hidden fees or charges.
While borrowers can repay interest in instalments, users can also opt to pay the full interest at the end term of the loan, giving borrowers the flexibility to pay interest in a way that suits their financial circumstances – a unique proposition not readily available through traditional lending products.
To give users confidence that their cryptocurrency will be in safe hands, Loda has appointed Fireblocks to act as custodian. Fireblocks is a world leading crypto and digital asset custodian, serving over 800 institutions globally. All assets are stored in bank-grade Class III vaults, giving users peace of mind and instant access to funds when the loan is repaid.
Loda currently accepts nine cryptocurrencies as collateral options, including Bitcoin, Ethereum, Tether, USD Coin and Dai, a list that will continue to grow over time. Application is quick, users simply deposit their assets and borrow AUD.
Allowing crypto-asset holders instant access to more traditional forms of credit is a fundamental building block to transitioning to this new decentralized financial economy.
As Australia’s first provider of crypto collateralised loans, Loda is offering a new competitive and tax efficient lending solution that will no doubt only grow over time.
Loans larger than $250,000 can be arranged quickly by contacting firstname.lastname@example.org.
Crypto tax for DEFI can be new territory to navigate but whether it’s accounting or bookkeeping we have you covered! Check out our crypto tax services for DEFI situations and feel free to get in touch.
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Stuart Reynolds is the founder of Fullstack Advisory, an award-winning accounting firm for businesses leading the future. He is a 3rd generation accountant who specialises in tech companies, crypto and entrepreneurs.