For those who have been hit hard by COVID-19, there are ways to keep your finances steady. A new alternative to regular bank loans are bitcoin loans.

It’s known as DeFi: Decentralized Finance. Borrowers and lenders can interact without third parties or other centralized entities. The loans are all managed by smart contracts.

But even though these bitcoin loan contracts are “smart” -- are they better than regular loans?

Let’s run through the basics and compare and contrast.

Bitcoin Loans: No Credit Score Needed.

Your credit score can determine not just whether you’ll get a loan or not, but how much interest you’ll be paying. The worse your credit score, the more interest you’ll pay.

Bitcoin loans require no credit score check whatsoever. If you’re a borrower with bad credit, you’ll get access to the same interest rates as everyone else.

If you’re a borrower with great credit, then there’s benefits for you too.

Bitcoin Loans: Fast and Fair

A regular loan can take 2-3 days to process. They need to check your credit score, process your info, and disperse money to your account.

Bitcoin loans, on the other hand, can be applied for and money deposited in your account in 30 minutes or less.

Why’s that? Because bitcoin loans only need you to do a KYC check and put up collateral before they wrap up the loan and give you the loan amount.

So if it takes you 10 minutes to fill out the KYC then it should only take you the standard amount of time to transfer Bitcoin, which is another 10 minutes. And then another 10 minutes to receive the funds.

Bitcoin Loans: How do they work?

Bitcoin loans are simple to grasp. Here’s the rundown.

As a borrower:

Find a bitcoin loan platform that is safe, secure, and offers great rates.

The best bitcoin loan platforms on the market today are deeply discussed (pro/con, rates, collateral, etc) in this article: https://cryptomaniaks.com/bitcoin-loan

Go through KYC

KYC stands for Know-Your-Customer. The safest bitcoin loan sites are registered companies that abide by government regulations. Therefore they must perform these KYC checks to stay inside government AML (anti-money laundering) laws.

Put up collateral

To secure your loan you’ll need to put up collateral. This means depositing Bitcoin, Ethereum, or another cryptocurrency into your account so that it can be locked up. When you’ve repaid your loan, it’ll be unlocked and given back to you.

After those three steps, the bitcoin loan platform will deposit into your account your loan amount in either stablecoins or the cash of your bank account, depending on your choice.

Bitcoin Loans: Not 100% Amazing.

DeFi may be the future of finance, but it’s not there yet.

For example, on April 19th, 2020, a DeFi platform known as dForce was hacked. In three hours, $25 million in customer funds was stolen.

Two days later the sum was returned.

But still, that’s a scary thing.

The best way to stay safe is to stick to the top bitcoin loan sites provided above.