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Crypto loans: The difference between APR and interest rates

To read:
3 minutes
Posted:
27th September 2019

What is an APR?

An APR or annual percentage rate, is the full rate you will be charged over the course of your loan. This number is a function of the amount borrowed, the fees charged, and the duration of the loan.

What is a crypto Interest Rate

Interest Rate refers to the percentage of interest you will be charged over the duration of your loan.

What to look for when comparing Bitcoin loan APR?

When shopping for crypto loans, use the APR as your unit for apples-to-apples comparison.

The lower the APR, the less money you have to pay.

Other factors?

Will the loan be “interest only” or “amortized”?

An interest only loan means your monthly payments are only on the interest due. For example, if your loan has a 4.5% interest rate, that ends up being 0.4% per month.

The total loan amount must be paid back at the end of your term.

An amortized loan requires you to pay interest & principal, usually on a monthly basis. Although this means your monthly payments will be higher, you will not have a “balloon” payment at the end of your loan term.

What is an LTV ratio of a loan?

LTV is the loan-to-value ratio of the loan. The LTV determines the amount of crypto collateral you need to provide the lender before receiving your loan.

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