November 24, 2022
  • November 24, 2022

Can you use a personal loan to buy cryptocurrency?

By on February 10, 2022 0

As cryptocurrencies continue to rise in popularity, more and more people are trying to get into the frenzy of digital currencies. Bitcoin prices were at their all-time highs in November 2021 and while prices have dropped significantly since then due to rising inflation, prices are still high and rising by PLN 44,250.

Since these high prices and cryptocurrency are such a popular commodity, some have started taking out loans to buy digital currency and even taking out mortgage loans. While it may be tempting to take out other loans to become part of this investment phenomenon, borrowing money that you don’t need and may not be able to pay back is never a good idea.

Can you get a loan to buy cryptocurrency?

Personal loans can be used for various purposes. If you are going to take out a personal loan to buy cryptocurrency, you should check the guidelines of the individual lenders to see if they explicitly prohibit the use of loans for this purpose.

Unless otherwise stated, most lenders allow you to take out personal loans for anything you want as long as you meet the eligibility requirements. If you are looking for a loan to buy cryptocurrency, check rates from the best personal and DIY loan lenders.

Since cryptocurrency is relatively new, most lenders do not explicitly prohibit the use of loan money for this purpose. Many lenders also don’t ask what you’re spending your money on. If you find a lender who doesn’t care about the purpose of your loan, you can apply for a personal loan online and use the money to buy cryptocurrency.

Can you borrow against cryptocurrency to buy more cryptocurrencies?

It is possible to use digital currency as collateral to purchase more cryptocurrencies through crypto loans. It is the process of taking out a secure, cryptocurrency-secured loan through cryptocurrency lending platforms such as BlockFi and Nexo.

Crypto loans have several advantages including low interest rates, choice of loan currency, fast financing, and no credit check. However, placing cryptocurrency as collateral is extremely risky as cryptocurrency can be volatile and the value of your assets can drop significantly. This puts you at risk of defaulting on your loan and paying back much more than you originally borrowed.

There are other risks and disadvantages as well, including different repayment terms and asset eligibility, and no access to the currency used as collateral during the loan term.

Is borrowing money to buy cryptocurrency a bad idea?

Whether you plan to take out a regular loan to buy cryptocurrency or you want to take cryptocurrency to buy even more digital coins, taking out a loan for an uncertain investment is extremely risky.

You will commit to making payments and paying interest on the loan no matter what happens to your cryptocurrency value. As the cryptocurrency market is unregulated and volatile, you could lose money or have problems paying out your loan installments. Crypto loans are just as risky, if not more risky considering you don’t have access to the cryptocurrency you have put in place as collateral during the loan term.

In many ways, using a loan to buy a cryptocurrency is similar to obtaining a gambling loan. You cannot guarantee that you will earn with the cryptocurrency, but you will still have to pay off the loan. If you are planning to pay off the loan at a profit, you may not be able to. If you lose money in cryptocurrency in general, you may not be able to pay off the loan. Failure to repay a loan usually involves large fees and a significant drop in creditworthiness.

In general, you should only buy cryptocurrency with money you can afford to lose. You shouldn’t buy it with a loan or credit card, which may put you at risk if you can’t make the payment.

The main thing!

It is never recommended to take out a personal loan or borrow money to invest in cryptocurrency. While a digital coin is a hot commodity these days and can be very profitable, it is an extremely volatile market. You can get into debt by trying to play the market with money you don’t have.

If you want to tackle cryptocurrency, it’s important to do your research and only invest money that you can lose if something goes wrong.