Helio Lending, an Australian company, is now issuing loans that are backed by virtual currencies. As a result, people living in this country can trade their Bitcoin, Ripple, Ethereum, or Litecoin for fiat money. The supported currencies are US dollars, Australian dollars, Euros, and Hong Kong dollars.
Loans are Approved on the Same Day Requests are Made
According to Helio Lending, requests made for loans are approved on the same day. The first step is to transfer a digital currency to the company, and then a loan is issued directly to the user’s bank account. This collateral is refunded when the loan and its interest have been paid.
The Melbourne-based company operates under the Australian Credit License (ACL). The Australian Securities and Investments Commission (ASIC) issued this license to allow the company to offer its financial services legally. Therefore, Helio can issue loans scheduled for up to 25 years.
Lending Period Ranges Between 60 Days and 5 Years
Presently, loans have a maximum time frame of five years and a minimum of 60 days. The least that can be borrowed is 1,000 dollars, and it ranges up to 5 million dollars. But then, how much a customer can borrow is determined by the value of their collateral. That is to say; funds are issued based on a Loan to Value (LVR) Ratio of 50 per cent.
For instance, if you’ve transferred 20,000 dollars worth of Bitcoin or Altcoin to the company, the highest you can borrow in fiat money is 10,000 dollars. Depending on the amount to be lent, interest rates will be set. If the money is borrowed up to a year, the Annual Percentage Rate (APR) will range between 17 to 24 per cent.
Interest is Determined by the Amount Borrowed
The APR is the percentage of interest that is to be paid every year for the loan. Comparing it to the LVR, a customer who uses the highest LVR will have to pay an APR that is up to 24 per cent. On the other hand, a customer who chooses an LVR of 40% and 30% will pay an interest rate of 20% and 17% respectively.
While this is a remarkable development, there have been concerns that these interest rates are higher than that of its competitors in the real world. It is said that the Australian-issued credit cards range between 12.5% and 20%. According to Helio Lending, these high rates can be attributed to the exemption of establishment fees or monthly account fees.
It is also worthy to note that there may be certain downsides to these lending process. One of such is that the customer’s collateral can be liquidated. This can happen if the price of the digital asset falls and its value becomes 95% of the loan amount. That being so, collateral of 20,000 dollars whose value has depreciated to at least 9,500 dollars means that the company can keep the user’s cryptocurrency.