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Cryptocurrency

Crypto Loans vs. Traditional Loans: What’s the Best Option for You?

Judith MwauraBy Judith MwauraJune 17, 2025No Comments7 Mins Read
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Are you thinking of borrowing money and already own some cryptocurrency? If so, you’re in a great position to choose between a crypto loan and a traditional loan. But how do you know which one is right for your needs?

This guide will help you clearly understand how these two types of loans work, their pros and cons, and when it makes sense to choose one over the other.


What is a Crypto Loan?

A crypto loan, also known as a crypto-backed loan, lets you borrow money by using your cryptocurrency as collateral. That means you deposit your digital assets (like Bitcoin or Ethereum) with a lender, and in return, you receive a loan—either in traditional money (like USD or KES) or another cryptocurrency.

The amount you can borrow is based on the value of your crypto and is determined by something called a Loan-to-Value (LTV) ratio. For example, if a platform offers a 50% LTV and you deposit $10,000 worth of Bitcoin, you might be able to borrow up to $5,000.


What is a Traditional Loan?

A traditional loan is what most people are familiar with. It’s a loan offered by banks, credit unions, or other financial institutions. These loans can either be:

  • Secured: backed by something valuable, like a house or car
  • Unsecured: based on your credit score and ability to repay, with no collateral needed

Repayment is usually made in monthly installments, and the lender charges you interest based on the loan type, collateral (if any), and your credit history.


Main Differences Between Crypto and Traditional Loans

1. Collateral Requirements

  • Crypto Loans: You must deposit cryptocurrency to secure the loan. The LTV ratio decides how much you can borrow.
  • Traditional Loans: May require collateral (like a vehicle or house for secured loans), but not always. For unsecured loans, approval depends mainly on your credit score and income.

2. Interest Rates

  • Crypto Loans: Often come with lower interest rates because crypto is considered a highly liquid and valuable asset. But rates can vary by platform and market conditions.
  • Traditional Loans: Interest rates depend on the loan type, collateral, and your credit score. Secured loans generally have lower rates than unsecured ones.

3. Credit Checks

  • Crypto Loans: Most lenders don’t require a credit check. Your crypto collateral is the lender’s safety net.
  • Traditional Loans: Almost always involve a credit check, which affects whether you’re approved and what interest rate you’ll pay.

4. Speed and Approval Time

  • Crypto Loans: Fast approvals—often within a few hours—because there’s no paperwork or credit review.
  • Traditional Loans: Usually take longer, sometimes days or even weeks, due to paperwork, underwriting, and credit analysis.

5. Accessibility

  • Crypto Loans: Available to anyone with crypto, regardless of location or credit score. You just need to hold enough cryptocurrency.
  • Traditional Loans: Availability varies by country, your income, and your credit history. Some people may struggle to qualify, especially in regions with limited banking access.

Benefits of Traditional Loans

  • Regulated: Banks and financial institutions operate under government regulations, offering consumer protections.
  • Wide Range of Options: From personal loans to home mortgages, you can choose what best fits your needs.
  • Predictable Payments: Many traditional loans have fixed interest rates and regular payment schedules, helping you plan your finances.

Risks and Downsides of Crypto Loans

  • Price Volatility: Crypto values can change quickly. If your collateral drops in value, your loan could become undercollateralized, triggering a margin call or liquidation.
  • Regulatory Uncertainty: Crypto lending isn’t fully regulated in many countries, so laws and platform rules can change unexpectedly.
  • Security Risks: If your crypto is not stored securely, it could be hacked or stolen.

Risks and Downsides of Traditional Loans

  • Strict Requirements: You need good credit, stable income, and lots of documents to qualify.
  • Higher Rates on Unsecured Loans: Loans without collateral tend to have higher interest because lenders take more risk.
  • Slower Processing: Approval and disbursement can take a long time—days or even weeks—due to paperwork and credit checks.

When Should You Choose a Crypto Loan?

You might want to take a crypto loan if:

  • You hold a significant amount of crypto and want quick access to cash.
  • You don’t want to sell your crypto, hoping its value will go up in the future.
  • You want to avoid credit checks or don’t have a strong credit history.
  • You live in a country with limited access to traditional banking.

Crypto loans are also a smart option for people looking for fast funding with competitive rates and less paperwork.


When Should You Choose a Traditional Loan?

Go with a traditional loan if:

  • You prefer stability, predictability, and fixed monthly payments.
  • You have good credit and can qualify for low-interest rates.
  • You want to borrow large amounts over a longer period (like for a house or car).
  • You’re not comfortable with the risk of crypto volatility.

Why Ledn Could Be the Right Choice for Your Crypto Loan

If you decide that a crypto loan is the way to go, Ledn offers one of the safest and most transparent platforms in the space. Here’s why:

1. Flexible Loan Terms

Ledn gives you freedom with your repayments. There are:

  • No monthly interest payments
  • No penalties for early repayment

This flexibility lets you manage your cash flow and repay the loan at your own pace.


2. Multiple Loan Options

Ledn offers tailored loan products for different users:

  • Standard Bitcoin-backed Loans: These loans use rehypothecation, allowing lower interest rates by reusing your collateral in safe ways.
  • Custodied Loans: Your collateral is held securely with a trusted partner and not rehypothecated. Though rates may be 2-3% higher, they offer greater peace of mind.
  • B2X Loans: A unique product where you take out a loan to buy more Bitcoin. Once the loan is repaid, you receive both your original collateral and the extra Bitcoin—ideal for those looking to double down on their investment.

3. Transparency and Client Protection

Ledn stands out for its commitment to openness and customer trust:

  • Monthly Open Book Reports to show how the business is running.
  • Proof of Reserves so clients know their assets are safe.
  • No withdrawal freezes—Ledn has never paused customer withdrawals.

Fees are clearly outlined, so there are no surprise charges later on.


4. Security and Reputation

Ledn is backed by respected investors like Coinbase, White Star Capital, 10T Holdings, and more. It supports major assets like BTC, USDC, USDT, and ETH and partners with BitGo, a well-known crypto custodian. It also uses AES-256 encryption and mandatory 2FA, keeping your digital assets protected at all times.


Frequently Asked Questions (FAQs)

Are crypto loans safe?

Crypto loans can be safe if you use a reputable platform with strong security, transparent policies, and solid risk management. But always consider risks like market volatility and changing regulations.


What happens if my crypto collateral drops in value?

If your crypto drops too much in price, you may receive a margin call. You’ll need to:

  • Add more collateral
  • Repay part of the loan
  • Or risk having your assets liquidated

Can I get a crypto loan with no collateral?

Most crypto loans are collateralized. Unsecured crypto loans exist but are very rare and usually come with high interest rates and strict approval conditions.


Can I use a crypto loan to buy property or a house?

In some cases, yes—but it depends on the lender and your country’s laws. You’ll need to check if the mortgage provider allows funds from crypto-based sources.


Can I use a crypto loan to buy more crypto?

Yes. In fact, Ledn’s B2X Loan is designed specifically for this. It lets you borrow to purchase more Bitcoin while keeping your original crypto collateral.


Final Thoughts: Which Loan Should You Choose?

Choosing between a crypto loan and a traditional loan depends on your personal situation, financial goals, and risk tolerance.

  • Crypto loans are fast, accessible, and don’t require credit checks—but they come with crypto market risks.
  • Traditional loans offer reliability, regulation, and stable repayment terms—but may be harder to qualify for.

Take time to review your needs, compare your options, and pick the loan that helps you reach your goals without unnecessary risk.

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Judith Mwaura is a dedicated journalist specializing in current affairs and breaking news. She is passionate about delivering accurate, timely, and well-researched stories on politics, business, and social issues. Her commitment to journalism ensures readers stay informed with engaging and impactful news.

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