Binance Loans begins accepting AVAX and ADA as collateral assets
Binance announced that Binance Loans has started accepting AVAX and ADA tokens as collateral assets.
New Binance Loans Collateral Assets (AVAX and ADA)
Binance Loans will now accept AVAX and ADA as collateral where they will provide loan orders secured by both tokens to reduce the cost of borrowing.
However, Binance Loans also offers a number of cryptos as collateral assets, lending limits, and interest rates that depend on internal risk mitigation and market conditions.
Difference Between Crypto Lending and Traditional Lending
Basically, Crypto loans and traditional loans depend on the same principle, but the main difference between the two lies in the way people account for their money. In traditional lending, credit scores are used to determine risk, but in crypto lending, credit ratings are irrelevant. Institutions can use merchant crypto as collateral until the borrower repays the loan.
In Crypto Loans, the repayment period can be shorter than that of ordinary loans, for example, Binance Loans offers a loan term of around 7 to 180 days.
The Risks of Crypto Lending
One of the risks with Crypto loans is the volatility of cryptos which makes them unstable compared to normal currencies. For example, the value of the crypto may drop, making the value of the lender’s collateral lower than the loan.
However, crypto loans may attract investors for a number of reasons, as a number of traders might not consider liquidating their assets. Crypto loans can help merchants earn interest on their assets.
Also, traders can use Bitcoin (BTC) to borrow USDT or BUSD as there is a high probability that the value of the collateral will increase and be worth more than the loan. The value of BTC can increase to generate profit for the borrower.