As Kambo, we would like to offer you a brief explanation of how our lending system works. Here is a sample loan to show you how our loans work.
Loan Example
Setting up your loan
Here is an example of a $1,000 loan backed by a portfolio of Ethereum. (Let’s assume the price of 1 ETH is 100 USD, for our example’s sake).
Kambo also offers loans in US Dollars and Euros. For our example, we are choosing to borrow USD.
- Amount Borrowed: 1000 USD
- Interest Rate: 14%
- Loan Term: 1 year
- Loan to Value: 50%
Kambo requires all loans to be backed by crypto-assets and lends up to 50% of a crypto-portfolio. Therefore a loan of 1000 USD would need to be backed by 20 ETH (given 1 ETH=100 USD).
- Collateral Required: 20 ETH (Assuming 1 ETH = 100 USD)¹
- Monthly Payment: $0 (Kambo does not charge monthly interest)²
- Yearly Accumulated Interest: $140
¹ Kambo uses Bitstamp data for all cryptocurrency pricing.
² Kambo does not charge monthly interest. Accumulated interest is charged at the time when loan is repaid.
You can choose to back your loan with a mix of cryptocurrencies as collateral. In our example we used only ETH but you can use any combination of Ethereum and Bitcoin as collateral, as long as the loan to value ratio is at or below 50%.
Loan to value ratio is calculated as Loan Amount divided by Collateral Value. Loan to value (LTV) can be thought of as the “healthiness” of your loan or your collateral’s capacity to cover for the amount borrowed. Your LTV will change as the value of your collateral fluctuates. As Kambo we recommend the LTV to be kept at or below 50%.
It should also be noted that, Kambo offers loans in EUR and USD.
Once your loan application is processed and approved, funds are disbursed to your bank account the same day. To see how Kambo’s loan application process works in detail please visit; How To Get Your Kambo Loan in Four Quick and Easy Steps)
Servicing your loan
Once your funds are disbursed to your bank account and are your disposal, your loan is officially active.
Even though Kambo loans are setup with 12 month terms, you can choose to repay your loan anytime without any incurring fees (such as early repayment fees or prepayment penalties). If you wish keep your loan for more than 12 months, Kambo loans can be renewed at the end of their 12 month period.
As the prices of your cryptocurrencies change throughout the lifetime of your loan, your LTV will change with it. When the value of your deposited collateral increases, your LTV moves below 50%. This means that your loan is in good status and that you have excess collateral in your Kambo account. If you choose, you can withdraw additional fiat to your bank account or withdraw some your collateral (up to the point where your LTV is back at 50%).
This means as the value of your crypto increases, you can unleash the additional gained value via more credit or simply by withdrawing some of the crypto.
If cryptocurrency prices move to your disadvantage, your LTV will increase. Kambo will notify you in case your LTV rises above 70%. An LTV ratio of 80 percent or above is considered high. Kambo will notify you if and when your LTV rises above 70%, 75% and 80%. If your LTV rises above 85% Kambo may liquidate your funds, to cover for your loan. Therefore if your LTV rises to 70% -80% levels, we suggest you either add more collateral to your account or repay some of your loan’s principal to bring your LTV down to the recommended level of 50%.
During your loan, there are no periodic payments. All interest along with the principal is collected when you decide to terminate your loan. Besides keeping an eye on your loan’s LTV ratio and effectively it’s health, no action is required from your part until you decide to terminate the loan.
Repaying your loan
Whenever you wish to repay your loan, Kambo offers you two repayment options: you can either deduct the amount owed from your deposited collateral or repay your loan with fiat currencies.
After you have repaid your loan, your cryptocurrency will be released to the cryptocurrency address of your choosing.
To terminate our example loan when it matures (after 12 months), you will just need to pay the lump-sum of $1,000 + $140 (principal + your accrued interest of $140 based on the %14 interest rate). There are no additional fees or charges throughout the life of your loan. It’s that simple!
If you have any further questions feel free to visit our website and reach us through our live chat option :)
