Advantages of Crypto Mortgage & House Loan!
Holding crypto assets past the Crypto Winter period can still be rewarding for numerous crypto investors globally. From saving on taxes to retaining cheaply purchased crypto assets that shoot up years later in value, read about them all here!
1. Long-Term Ownership
The foremost reason why NFT or crypto holders could engage in loaning their VDA is to prevent selling them. Most likely, such holders of Crypto NFTs or tokens have a bullish outlook on ownership, considering that they would like to retain the assets longer when they are worth more than quadruple their initial investment.
2. Tax Collateral Deductibles
Major VDA mortgage lenders opt to participate in such platforms because they can offer them tax deductions. Although certain nations could levy severe taxes on crypto ownership or trading activities, listing it as collateral could be beneficial, especially when you own millions in crypto assets.
3. Easy Documentation
Most platforms offering crypto lending or borrowing services do so without asking for a long list of documentation. Since platforms can link crypto wallets seamlessly, and NFT tokens or crypto coins carry identifiers, it’s a paperless process to lend or borrow them. Hence, anyone who aims to prevent affecting their banking and financial history and credit score can engage in crypto mortgage practices.
Disadvantages of Crypto Mortgage & House Loan!
Providing or obtaining a crypto NFT loan surely is beneficial, but it does carry significant shortcomings on the alternative side. The critical risks of mortgaging crypto can be tough to mitigate because they can compound swiftly. Thus, it’s advisable to consider the following factors before indulging in Crypto mortgage activities.
1. Assets Hypothecation
Your digital assets are pledged on the network when you lend crypto or choose to borrow using a crypto mortgage. It translates that you cannot withdraw them for a definite period or without paying extra charges.
Such cases can make you lose opportunities where you can obtain better returns on them by trading or staking them. Moreover, you also miss the opportunity to sell them off when the market is dipping more than it has risen.
2. Crypto Volatility
The case of cryptos being volatile has so far been an all-time risk despite the market currently exceeding the $1 trillion mark. In situations where you have locked your crypto to the VDA mortgage network, it’s possible that it may ask you to add more assets to match the lending/borrowing value.
In similar scenarios, the network can also liquidate your crypto assets, wherein you could lose them partially or wholly. The entailing circumstances of such situations can land you in significant financial troubles, even if the network declares bankruptcy.
3. Limited Pledge Support
Another drawback of crypto mortgage activities is that you do not get many options. Most lending networks only support a limited number of crypto assets, or essentially the top three ones. Since those top crypto assets are already pricey, it can be difficult to mortgage digital assets that are in small numbers.
Conclusion
Crypto mortgages and house loans offer an innovative way to unlock liquidity without selling valuable digital assets. They provide benefits such as tax efficiency, fast approval, and minimal documentation, making them attractive to long-term crypto holders. However, risks like volatility, asset lock-in, and limited asset support cannot be ignored. Understanding both advantages and disadvantages is essential before opting for a crypto-backed loan. A well-informed decision can help investors balance growth opportunities with financial security.
