What Is SALT Blockchain-Based Lending?
SALT stands for Secured Automated Lending Technology. It is a platform that allows users to borrow money by using their cryptocurrency as collateral instead of traditional assets like property or stocks.
Launched in 2016 by a group of Bitcoin supporters, SALT was designed to offer a flexible loan option to crypto investors. It allows them to unlock the value of their digital currencies without selling them. This article explains how SALT works, its features, benefits, and the potential risks involved.
Key Highlights
- SALT Lending lets people borrow money by offering cryptocurrency as security.
- The platform supports both personal and business loans.
- Borrowers keep ownership of their crypto assets while getting access to cash.
- If the crypto’s value drops below a certain level, SALT may issue a “collateral maintenance call”, similar to a margin call in stock trading.
- Loan durations can be 12, 36, or 60 months, with interest rates typically ranging between 8.95% and 14.45%, depending on the loan terms and the loan-to-value (LTV) ratio.
How SALT Lending Works
To access SALT’s lending services, a user needs to become a member by purchasing SALT tokens, which are the platform’s native cryptocurrency. Once they’re a member, they can apply for a loan by offering crypto as collateral. SALT connects these borrowers with a network of lenders.
The minimum loan amount offered by SALT is $1,000, and the money can be used for any purpose—such as paying debts or buying a car. SALT operates on an ERC-20 smart contract, which automates the enforcement of loan terms. ERC-20 is the standard used for Ethereum-based tokens, ensuring secure and smooth transactions.
Borrowers can use only blockchain-verified cryptocurrencies as collateral. Some supported digital assets include:
- Bitcoin (BTC)
- Bitcoin Cash (BCH)
- Ethereum (ETH)
- Litecoin (LTC)
- TrueUSD (TUSD)
- USD Coin (USDC)
- Paxos Standard (PAX)
- PAX Gold (PAXG)
- SALT Token (SALT)
Once the loan is approved, borrowers send their cryptocurrency to SALT’s secure wallet. Then, the loan amount is transferred to their bank account. Even though the crypto is used as collateral, it still belongs to the borrower. So if the value of the crypto increases, the borrower benefits from that growth.
Throughout the loan period, the borrower must make scheduled payments. When the loan is fully paid off, SALT returns the crypto collateral.
Important to Know
SALT Lending was impacted during the FTX exchange collapse in November 2022. This caused them to temporarily pause both deposits and withdrawals. Additionally, SALT’s lending license was suspended in California.
However, in February 2023, the company received a $64 million investment and stated that it had started a new growth strategy to strengthen its business and rebuild trust with users.
SALT Loan Approval Criteria
Unlike traditional loans that rely on a credit check or a borrower’s credit score, SALT loans focus mainly on the value of the borrower’s crypto assets. If the borrower fails to repay the loan, SALT can liquidate the collateral to recover the funds.
However, borrowers must still go through KYC (Know Your Customer) and AML (Anti-Money Laundering) verification before getting approved. Once verified and eligible, the borrower can continue with the loan application process.
Understanding SALT’s Loan-to-Value (LTV) Ratio
The loan-to-value (LTV) ratio is very important in SALT’s lending system. Since cryptocurrencies can be highly volatile, the value of the collateral may change frequently.
If the price of the crypto rises, the borrower may become eligible for additional funds or enjoy extra asset value. But if the crypto price drops, the LTV ratio increases, and the borrower may get a margin call or even face forced stabilization.
How LTV Is Calculated
The LTV ratio is the amount of the loan divided by the current dollar value of the crypto collateral. For example:
If you borrow $100,000 and your collateral is $155,000 worth of Bitcoin, your initial LTV would be 65% (100,000 ÷ 155,000 = 0.65).
Over time, this ratio can decrease as you repay the loan. But if your crypto drops in value—say to $110,000—your LTV rises to around 91%, triggering a margin call. In such cases, you’ll need to deposit more crypto or repay part of the loan to rebalance the LTV ratio.
A smart contract constantly monitors and updates the LTV ratio during the loan’s lifetime.
LTV Ratio Trigger Points on SALT
SALT has set specific LTV levels that act as warning signals or triggers for action:
- 75% LTV – First warning margin call.
- 83.3% LTV – Margin call issued, with a 48-hour deadline to reduce LTV to 70%.
- 90.91% LTV – Automatic stabilization begins. SALT converts the crypto collateral into a stablecoin, charging a 5% fee.
Once the LTV drops back below 83.33%, the borrower can reconvert the stablecoins back to their original crypto assets.
This stabilization process helps protect both the lender and the borrower during periods of high volatility and market crashes.
SALT Loan Terms, Interest Rates, and Fees
SALT offers flexible loan terms of 12, 36, or 60 months. There is no origination fee, which makes SALT attractive compared to traditional lenders.
Interest rates vary based on the LTV ratio and loan length and typically range between 0.95% to 9.99%. However, if stabilization occurs due to a sharp drop in asset value, a 5% processing fee is applied.
Note: While the crypto is held as collateral, it does not earn any interest during the loan period.
Advantages of Using SALT Loans
SALT loans are ideal for long-term crypto holders—commonly called HODLers. These are people who believe their digital assets will rise in value and prefer not to sell them.
By using SALT, they can hold onto their assets and still gain access to cash for other needs, such as paying bills, investing elsewhere, or funding personal projects.
This allows borrowers to benefit from future price gains while meeting present financial needs.
Who Is a HODLer?
The term “HODLer” started as a misspelling of “hold” but has now become a common term in the crypto community. It stands for “Hold On for Dear Life” and refers to people who keep their digital currencies long-term instead of trading frequently.
What Is a Loan-to-Value (LTV) Ratio?
The LTV ratio is the proportion between the amount of the loan and the value of the collateral. It’s an important metric in crypto lending because both the loan and the collateral can fluctuate in value, especially when dealing with volatile cryptocurrencies.
Risks of Crypto-Backed Lending
While SALT offers unique advantages, there are also important risks:
- Smart contract vulnerabilities – Errors or bugs in the code can be exploited.
- Security breaches – Hackers can target lending platforms or custodians.
- Regulatory uncertainty – The laws governing crypto lending are still evolving and unclear in many countries.
- Market volatility – Sharp price drops in crypto assets can lead to forced liquidation or stabilization.
These risks affect both borrowers and lenders, making it essential to understand the platform and market before using such services.
Final Thoughts
SALT blockchain-based lending gives crypto investors a smart way to access cash without having to sell their valuable digital assets.
However, borrowers must be prepared for the risks—especially the price volatility of cryptocurrencies. If the value of their collateral falls sharply, they may need to deposit more crypto or repay part of the loan to maintain the required LTV.
SALT offers a promising and innovative solution, but like all financial tools, it should be used with caution and proper understanding.
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