Quick guide to lend or borrow on Lend at Hodl Hodl
This guide will help you take your first steps to using the Lend at Hodl Hodl platform.
Lend at Hodl Hodl (lend.hodlhodl.com) is a platform designed so that users from all around the world can lend or borrow between themselves without having to trust a third party or complete a verification procedure.
LEND allows you to lend or borrow different stablecoins or cryptocurrency using BTC as collateral. (At the moment, it is not possible to lend BTC, although that possibility is being developed for the future).
Once you have registered on the platform with just your nickname and an email, you will be ready to start lending or borrowing.
First, we are going to search among the existing offers for one that suits our needs. (Always bear in mind that you can publish your own offer if no existing offers satisfy you).
Further down the main page we find the search box:
The search tool shows us the offers to borrow by default.
If we want to lend we must select the corresponding button.
We enter the amount we want to borrow and the cryptocurrency we are looking for.
The LTV ratio refers to the percentage of cryptocurrency that we will receive based on the value in BTC that we place as collateral. The higher the LTV, the higher the amount we borrow relative to the value in BTC that we deposit as collateral, but the possibility that our collateral (BTC) will be liquidated is also greater if its price drops. If we choose a low LTV, the amount we borrow relative to the value in BTC that we deposit as collateral will also be low, and there is less chance that our collateral (BTC) will be liquidated in the event of a decline in its price.
Finally we choose the term of the loan that we are willing to take. That is, for how long the lender will give us the requested amount, and a final return date will be established. The credit can be fully returned on the day the term expires or through partial payments throughout the entire contract period.
By clicking the “Find offers” button, the platform will return all offers that match our search criteria, and we will be able to choose the one that best suits us.
Suppose we choose the following offer:
The user “NateN-09” offers to lend between 100 and 500 USDT sent by the Liquid network for a period of 1 week, at a rate of 0.50% (bear in mind that the rate applies to the entire contract term).
In the APR section (Annual Percentage Rate) you can see how much the proposed rate corresponds to an annual extension, just as a reference for comparison with other financial services.
The percentage relationship (LTV) between the value of the collateral and the amount that the lender will give us is set to 70%, therefore we must place 30% more BTC value as collateral to back the loan. In other words, he/she lends us the 70% in stablecoins (or cryptocurrency) of the value in BTC that we lock as collateral. This is called an over-collateralized loan.
Once we enter the offer, we will see the details as follows:
If the offer seems appropriate and we decide to take it, we complete the pending fields and confirm with the “ACCEPT AND CREATE” button.
- In this case, the amount offered goes from 100 to 500 USDT over the Liquid network, so we input the amount that we need in the corresponding field.
- The period of the loan in this offer is fixed to 1 week.
- In the field “Cryptocurrency payment address” we enter the one where we want to receive the cryptocurrency we are borrowing.
- In the field “Bitcoin refund address” we put the one where we want to receive our BTC back once we have returned the loan.
In the green frame on the right we can see the details of the contract including the origination fee charged by the platform for providing the technical tools to carry out the contract.
Once the contract is accepted, a multi-signature escrow address is created where we must deposit the BTC amount due in order to support the contract.
To generate this address in the Bitcoin blockchain, we will be asked for a “Payment Password” (different from the login one) that will act as our private key to recover our BTC at the end of the contract.
When we have sent the BTC to the escrow address and it has been confirmed, the borrower will be able to send the requested cryptocurrency to the address that we entered in the previous step.
Once we have received them, we will confirm the link to the ID of the payment transaction that the borrower has sent us, and the contract will be active.
We must be careful that the LTV does not rise too much during the contract period so that our collateral is not liquidated. But don’t worry, the platform will send us an email and a notification every time the LTV moves towards risk margins.
We can make partial payments to return the loan or we can do it all together at the end of the term.
Once the entire loan plus interest is returned and the payments are confirmed, we will be able to withdraw our BTC from the multi-signature escrow address and the contract is finished.
In a future article we will describe the steps to follow if we act as lenders.
If you have any doubts regarding the procedure, do not hesitate to contact us through any of our support channels.
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