CoinLoan to Offer Loans in Fiat Secured by Crypto Assets
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Cryptocurrency can allow people to borrow money against pledged assets more easily and at better rates than the traditional banking method.
CoinLoan, a new startup, will enable users to receive funds in any currency secured by crypto assets. The system will automatically select the most suitable borrowing option available and make the loan available to the borrower in fiat currency. Loans will be issued without the need to verify the borrower’s solvency, as required in the traditional banking system.
The system will be flexible. Borrowers will be able to act as lenders, and vice versa.
The most common way for securing fiat currency for a crypto asset to date is to sell the asset on a cryptocurrency exchange. However, the volatility of cryptocurrency creates problems for this method.
Crypto Assets As Collateral
CoinLoan allows a cryptocurrency holder to get a loan in fiat currency with their crypto asset held as collateral. Before the end of the term of the loan, the borrower’s security deposit remains in the CoinLoan system. Once the loan and interest are paid, the pledged asset is returned to the borrower.
The platform will issue virtual or plastic payment cards that support Apple Pay and Samsung Pay. Borrowers will be able to receive credit funds in fiat currency. A payment card will allow them to cash out their funds at ATMs, pay for products or services at payment terminals, and shop online.
CoinLoan will accept bitcoin, Ethereum, Litecoin, Ripple, Dash and Monero as collateral for loans which will be issued in the following fiat currencies: USD, EUR, GBP, CNY, JPY, RUB, CHF, PLN and CZK. The list of cryptocurrencies accepted will expand.
In the traditional collateral scheme, the lender must verify the borrower’s solvency, arrange an assessment of their collateral, and hold the borrower’s assets. All of these costs are passed on to the borrower in the form of the interest rate.
CoinLoan, by contrast, guarantees repayment of funds in full along with interest for using the loan. The lender is relieved of the usual actions and risks. The borrower, in turn, receives a lower interest rate and does not have to sign papers, go to an office and wait in line for a property assessment. The borrower can receive funds via SWIFT, SEPA, instant transfer or bank card.
To offer a loan, a user has to deposit fiat funds into their personal account via SWIFT, SEPA, Sofort or bank card.
Platform To Assist With Loan Conditions
The lender will be able to check on real market offers to determine conditions that will allow for faster order execution. CoinLoan will provide statistical data, charts, executed deals and valid offers to assist lenders in this process.
Once a deal is completed, the crypto asset becomes the pledge of obligation fulfillment and is stored in the CoinLoan system. The lender then receives payment by monthly payment, which includes principal and monthly interest, or the entire amount at the end of the contact, including principal and interest. Should the borrower fail to meet their obligations, their pledged asset is automatically liquidated as debt repayment.
Throughout the term of the loan, the platform calculates the ratio of borrowed funds and collateral. The ratio of provided funds to the collateral changes with any change in the exchange rate. When this ratio falls, the system automatically sends a warning to the borrower about the need to replenish the balance or sell part of their pledged assets. The system automatically sells part of the collateral at the current rate to secure the loan if the borrower does not respond.
The lender does not have to independently assess the risk, and the borrower receives the loan without regard to their credit record.
A user who offers to lend money sets the interest rate, the amount of the loan and its term. CoinLoan then matches a borrower in its database for the loan.
CoinLoan will launch in 2018 with a European license, but the services will be available for most countries of the world except for those requiring a local license. In 2019, it will expand to Asia.
The minimum loan will be for $50.
ICO To Begin
CoinLoan will issue its own token, CLT, on the Ethereum blockchain using the ERC20 smart contract during its ICO, which will enable investors to take advantage of the new lending platform.
A pre-ICO will take place in the third quarter of 2017 and last for 30 days. The pre-ICO will be fixed at 1 CLT = $1. There will be a maximum 5 million tokens sold.
The main ICO will begin 14 days after the pre-ICO and last or 30 days. A total of 50 million tokens will be issued. One CL token will vary from $2 to $8, depending on the amount raised.
Following the platform’s official launch, one CL token will be worth $10. The platform will provide an API that lenders can integrate into their online services, allowing lenders to give loans using CoinLoan without offering borrowers the use of the platform directly.