A crypto-backed loan lets you borrow cash or stablecoins using your cryptocurrency as security, instead of selling it. You keep your exposure to the coin, get the money you need, and get your crypto back when you repay.

How a crypto-backed loan works

The idea is the same as any secured loan, like a mortgage secured by a house. The difference is that the security, called collateral, is cryptocurrency such as Bitcoin, Ethereum or Tether.

  1. You choose how much to borrow. The loan is a percentage of your collateral's value, called the loan-to-value ratio (LTV).
  2. You pledge your collateral. The coins are held for the length of the loan and can't be sold or moved by you while the loan is open.
  3. You receive the loan, usually in US dollars or a stablecoin such as USDT.
  4. You repay, typically interest along the way and the loan amount at the end.
  5. You get your collateral back, the same number of coins you pledged.

Why borrow instead of selling?

People who believe in the long-term value of their crypto often don't want to sell it. Borrowing against it has three main advantages:

  • You keep your upside. If your coins rise in value during the loan, that gain is still yours.
  • Selling may trigger tax. In many countries, selling crypto is a taxable event, while taking a loan generally isn't. Rules differ by country, so check with a tax adviser.
  • No credit history needed. Because the loan is secured by your collateral, the decision focuses on the collateral rather than your credit score.

What does it cost?

The main cost is interest, shown as an annual percentage rate (APR). Some lenders also charge origination, withdrawal or liquidation fees, so always compare the total cost of the loan, not just the rate. Helio loans have fixed rates from 3.25% to 7.95% APR and no origination fee. See every term on our rates & fees page.

The main risks

The biggest risk with most crypto loans is a falling market. With a typical loan, if your collateral's value drops far enough, the lender issues a margin call: add more collateral or repay part of the loan. If you can't, the lender can sell (liquidate) some or all of your coins, often at the worst possible moment.

Some lenders, including Helio, offer non-recourse loans with no margin calls, where price drops don't change your loan. Other risks to consider for any lender:

  • Custody risk. Your pledged coins are held by the lender or its custodian. Ask where they're kept, whether they're lent out, and whether they're insured.
  • Counterparty risk. If a lender fails, getting collateral back can be slow or uncertain. This is why checking a lender's licences, custody arrangements and track record matters.

What to check before you borrow

  • Who actually makes the loan, and which licences they hold
  • The full cost: APR plus every fee
  • What happens if prices fall, and what happens if you miss a payment
  • Where your collateral is held, and whether it's ever lent out
  • Whether you can repay early without a penalty

Try the numbers

Use our loan calculator to see what a loan against your crypto would cost, or read how borrowing with Helio works.

This article is general information, not financial, tax or legal advice.