Wait... So I Don’t Need Credit to Borrow Money 😱
How to borrow money without credit. The simple guide to borrowing with DeFi.
Today we’ll learn how to borrow money without the need for credit or permission.
What is Zerion?
According to Evgeny Yurtaev, CEO of Zerion:
We’ve redesigned the flow of our navigation to enable users to track the entire DeFi market from the same place they build and track their portfolio.
Zerion makes Decentralized Finance (DeFi) simple.
Select Connect Wallet to log into the application.
We suggest the Fortmatic option to log in.
If you don’t have an account, it’s not a problem. Continue to create your account.
When you type your email, you should be able to either log in or create an account. Another option is the phone sign in but we don’t prefer that method.
Type your password to create or sign into your Zerion account.
This is one of our favorite features. 👀 One of the biggest headaches in crypto is that people’s funds are lost once their private key is forgotten. No private key means you can’t access your blockchain applications or your money. Zerion solves this issue. 💪
Nothing is better than seeing the familiar forgot password 😁 for people that want to restore their accounts.
Let’s log in and explore DeFi! Above, is the homepage of the Zerion DeFi application. Now, select the hamburger menu icon on the top left to start borrowing. (Yes…the icon with the three horizontal lines)
Select borrow to begin borrowing 😁.
Proceed by selecting new loan.
The image above shows nine options for the cryptocurrencies that we can borrow. We suggest to borrow stablecoins, cryptocurrencies that don’t fluctuate in price and are worth a ratio of 1:1 to the U.S. dollar.
(Note: Zerion only holds ethereum and other cryptocurrencies running on the Ethereum network. The Wrapped BTC displayed above is bitcoin on Ethereum.)
Before we can pick out a cryptocurrency to borrow, let’s see which one has the best lending rate. 👀
USDC has a rate of 1.6 % APR.
DAI has a rate of 2.25 % APR.
And Tether has a rate of 1.2 % APR.
In this situation, Tether is the better option. The rates aren’t always the same and may vary from time to time, however, it leaves amazing opportunities for borrowing stablecoins at good rates and lending them on other platforms for higher rates.
Fulcrum has the highest current rate for lending at 29.23 %. The yield might go down, it might go up. 🎢
This is an example of what we call yield farming in DeFi. It’s a less risky way of making money with your cryptocurrencies. However, that’s a topic we’ll discuss for another article. Yield farming is completely changing the game of finance.
Binance Academy does a great job explaining yield farming HERE.
Now, let’s borrow some money! On the Zerion app, leave USDT at the top to borrow and another stablecoin at the bottom for providing collateral.
We selected USDC as collateral. 😁
Also, you’re able to select ethereum and a few other cryptocurrencies as collateral but they are more risky options. For example, if you’re using ethereum as collateral and it’s trading price on the cryptocurrency market goes down, then you’ll end up paying more for your debt. Stablecoins like USDT don’t have that kind of volatility.
In this scenario, we’ve deposited some profits from some profitable investments and would like a place to store it. So we go to the Zerion website, and leave our money as collateral to borrow against it. We’ll need $1,604.09 to borrow $1,000 in USDT.
If you don’t have any money in your Zerion wallet, go back to the homepage and select the middle icon add funds.
Add the cryptocurrency that you’ll be using as collateral. In this situation, we’ll be going with USDC.
Here are the options to add funds to your account. You can even use Apple Pay!
Let’s get back to the borrow tab! Here, we are going to borrow $1000 with $1605 in USDC as collateral. Unlike traditional systems, we only have to pay the total amount borrowed plus interest. There are no monthly payments and our estimated monthly interest is $0.99. If we end up paying back our loan in 5 months, it’ll have to be a payment of $1000 plus a total of five months interest.
This is a great strategy to really build your portfolio! Imagine lending out $800 of your borrowed money at a much higher interest rate 🧐 and taking a chance with the $200 left at a risky small market cap cryptocurrency project.
Why risky small cap cryptocurrency project? 🤓
😂😂😂🤷♂️
Five months later…If you would like to pay off your debt and your $200 cryptocurrency investment is up 50 percent, you’ve made $100 from that $200 plus some of the interest made from lending out your $800. We’re not going into much detail with the math but that’s enough to pay back the debt owed with a bit extra from what’s left in the collateral. Unfortunately, if you lose money from your $200 trade then some of the extra $605 provided will be used to pay off your losses.
After selecting borrow, scroll down to deposit your collateral.
If it’s your first time borrowing with Zerion, you’ll have to enable borrowing. Make sure you have a fair amount of ethereum in your wallet to pay the fees for the transaction. Zerion runs using Ethereum network, so we suggest you have at least $25 in ethereum for transactions.
We’ve just paid a one time fee of $0.97 to enable USDC as collateral. Now we’ll be able to add USDC and take out our loan!
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