How do Defi Auto Loans Work?

Decentralized finance loans (or DeFi loans for short) are one of the fastest growing, and perhaps most promising, sectors in the world of cryptocurrency and blockchain. While these loans can be used for just about anything, DeFi auto loans are poised to be one of the most practical applications of the technology to date.

Perhaps the answer to why they are so promising lies in the fact that DeFi auto lending is a true ‘what’s good for the goose is good for the gander’ scenario: as long as there are expensive products (like cars) to buy, consumers will want loans. It’s been that way since the dawn of civilization (just replace the carts with cars).

While traditional auto lending models require applicants to turn over hordes of sensitive data about their identity and financial situation, DeFi lending is accessible to anyone, anywhere — so long as they have a cryptocurrency wallet and hold some digital assets.

On the lending side of the equation, it has historically been big banks that benefit from the interest accrued on auto loans. Not so with DeFi. With DeFi auto loans, anyone who holds enough cryptocurrency can become a lender, and in turn, put their idle coins to use by having them earn interest.

Today we’re looking at how DeFi auto loans work and why you might want to re-think handing over every detail of your life to the bank the next time you decide to buy a car.

How DeFi Lending Works

DeFi loans come in all shapes and sizes and are used for many different applications. The one common denominator between them all is that pretty much anyone can become a lender so long as they hold enough cryptocurrency.

With DeFi loans, the bank’s lending offices are replaced with lending pools (also called liquidity pools) — groups of cryptocurrency holders who contribute a portion of their digital assets to fund certain types of loans with established parameters.

These lending pools include sub-prime, mid-prime, and prime. Each liquidity pool has its own set of risks and rewards, so lenders can choose the level they are comfortable with. Like traditional loans, the interest rate on DeFi auto loans corresponds to the lending pool, with sub-prime pools carrying the highest interest rates compared to the lower interest rates of prime pools.

Once the lending pools are fully funded, they become available to be distributed, allowing borrowers to purchase their new or used vehicle on using cryptocurrency. 

Benefits of DeFi Auto Loans

DeFi auto loans present a unique opportunity to both borrowers and lenders alike. They tear down some of the long-standing barriers that have stood in the way of equitable financing for years and open up the opportunity for earning passive income on your digital assets when individuals act as lenders. It’s a true peer-to-peer lending system.

Benefits for Lenders:

Earn Passive Income:

Cryptocurrency sitting in a digital wallet doesn’t accrue interest like United States Dollars do in a savings account. DeFi lending gives you a way to make any idle coins you’re holding work for you in the meantime by earning you even more.


Maximize Returns:

CarrDefi loan pools are designed to minimize risks while maximizing returns. We leverage over 50 years of financing experience to do this.


Loans are Asset-Backed:

While other types of DeFi loans require borrowers to over-collateralize by first depositing 120-200% of the loan’s value as a fail-safe against coin value fluctuations, DeFi auto loans also have the option of being asset-backed. That means the vehicle itself can act as collateral. In the event that the borrower defaults on the defi auto loan, Carnomaly handles collections, repossession, and auction of the vehicle.


CARR Token Incentives:

With Carrdefi, lenders can earn a higher interest rate when they choose to fund loans with Carnomaly’s own CARR Tokens.


Create Meaningful Change:

When you fund Defi lending pools, you’re helping to make the world of financing more inclusive and equitable than ever before.

Benefits for Borrowers:

Keep Your Money Out of the Big Banks’ Pockets:

With CarrDefi, you’re keeping your money out of the pockets of the big banks. Instead, that money benefits other cryptocurrency holders like you.



Anyone with an internet connection, a cryptocurrency wallet, and some crypto can participate.



DeFi auto loans will not impact your credit score, and since the process of obtaining a DeFi auto loan is anonymous, it is also unbiased.


A Better Approach to Lending:

DeFi auto loans through Carrdefi are more transparent, more accessible, and cheaper than traditional loans.


CARR Token Incentives:

Get discounts on vehicles when you purchase your new car with CARR tokens.

Where to Get a DeFi Auto Loan

Borrowers will soon be able to apply for a DeFi auto loan through Carnomaly’s own Carrdefi, the DeFi auto-lending arm of our automotive blockchain ecosystem.

Applying for a loan is a simple process. You’ll fill out a short application, and our digital financing team will match you with a loan that is right for you. You’ll be able to use existing cryptocurrency assets as collateral and choose from a number of term lengths, including 48, 60, or 72 months.

You’ll be able to choose which cryptocurrency to receive your funds in, including:
  • Bitcoin (BTC)
  • Ethereum (ETH)
  • CARR
  • and others

Funds are distributed within 30 days after the loan pool is fully funded.

With a history of on-time payments, you’ll even be able to move into a more favorable loan tier, lowering your interest rate and saving you even more.

How to Join a Lending Pool

At CarrDefi, our DeFi auto loan platform, individual lenders can choose from three different levels of liquidity pools, including:

Prime Lending Pool

These pools typically represent borrowers with credit scores from 650 and up. Rates go up to 7.9% APY, but if CARR is used in lieu of other coins, you can expect to see rates up to 8.5%. 

Mid-Prime Lending Pool

Mid-Prime pools are usually for borrowers with credit scores between 550-649 and will accrue interest at up to 12.9% APY (or 13.5% APY with CARR) 

Sub-Prime Lending Pool

This liquidity pool is intended for individuals with credit scores from 0-549. The APY when using other coins can reach 16.9% or 17.5% when using CARR.

All you’ll need to do is choose the lending pool based on the level of risk you’re comfortable with compared to the expected returns. Once the lending pool reaches full funding, the funds will be lent to borrowers, and you’ll begin receiving monthly returns as borrowers begin to make their monthly payments.

DeFi is the Future of Auto Lending

DeFi lending has already been applied to many different sectors. It’s only now, however, that DeFi lending is opening up to one of the most mainstream and popular types of loans in the country — auto loans.

Carrdefi will be the first DeFi lending program designed exclusively for auto loans. It will seamlessly merge years of experience in traditional auto financing with the future of finance that is looking ever more digital.

To stay up-to-date as we move closer to launching Carrdefi and our suite of blockchain-powered automotive solutions, be sure to sign up for our newsletter, or connect with us on Telegram.

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