Crypto is a potentially valuable investment asset, and if it suddenly dips significantly in price, you might be tempted to buy some for investment purposes. If you borrow money to buy it, you can pursue the investment opportunity without losing your current assets. Getting a loan isn't always easy, though, especially on short notice. So, you may be wondering if you can use online decentralized finance sites like Aave to borrow money to buy the crypto because you can usually get loans there very quickly. This article will answer that question for you.
Technically, you can't borrow money on Aave for crypto or any purpose, as Aave lends cryptocurrency, not fiat currency. However, you can borrow USDT on Aave, which is a stablecoin tethered in value to the U.S. dollar, so it's just like borrowing money to use to purchase another cryptocurrency. You can also borrow any other form of crypto Aave offers to make the purchase.
Aave makes getting crypto loans easy, without any of the requirements and jumping through hoops that traditional loans require. It can do that because all loans are secured with collateral. Specifically, you will need to deposit some other cryptocurrency to be used as collateral for your loan.
This collateral is held in escrow for the term of the loan. If you fail to repay the loan, it will be used to do it for you. If you do repay the loan, you'll get your collateral back.
Every loan on Aave is assigned a score that depends on the currencies involved. This score will tell you how much collateral you need to put up for your loan. For example, if your loan's score is 0.9, then you can borrow 0.9 coins of the crypto you want for every coin of collateral you put up.
Also, you'll need a web 3.0 digital wallet to get a loan from Aave.
To borrow crypto on Aave, just follow these steps:
If you need help, you can reach an Aave customer service representative by email. There is no phone contact option.
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