Crypto loans for cars may be the “future” of auto financing, but the future is here. Lenders are already beginning to tap into crypto car loans as an alternative means to secure lending right now in 2021.
And it’s not just crypto enthusiasts that are taking advantage of cryptocurrency car loans. The crypto-loan industry is growing and becoming increasingly mainstream with every new Dogecoin vs. Bitcoin tweet from Elon Musk. (We kid, we kid. Well, kind of.)
However you feel about the notorious Techno King of Tesla’s impact on crypto markets, his vocal opinions on the topic mean that more people than ever before are learning about cryptocurrency, establishing their crypto wallets, and even using crypto to buy everything from digital art to cars.
Today we’re taking a closer look at how crypto loans for cars work, why you might want to consider one for your next vehicle purchase, how to secure a crypto auto loan, and more.
The Problem with Traditional Auto Loans
Before we dive into crypto loans for cars, let’s take a look at the current state of auto lending. Spoiler alert: it’s a process that hasn’t changed much in decades.
Besides the hassle of the application process, the problems with traditional auto loans are many. First, there’s the problem of cost.
Traditional auto loans are expensive.
America has a growing challenge when it comes to automotive debt. Americans owe just about $1.4 trillion in automotive loan debt or about 5% of the total American consumer debt. Car buyers in the United States alone take out 2.3 million auto loans each month, and the average American pays $769 to 895 a year on their car loan, money that winds up in the hands of big banks.
Traditional auto loans are inflexible.
With a traditional loan, your interest rates are locked in for life unless you refinance your vehicle. That means that if you miss a payment or can’t afford to pay down interest on your loan, it will stay high as long as you have debt from that lender.
They are prone to prejudice.
When borrowers are required to hand over a mountain of personal data in order to paint a picture for would-be lenders of their worthiness, a certain amount of subjectivity is bound to come into play. That opens the door for everything from unconscious biases to outright and blatant discrimination.
Fortunately, new means of securing financing for your next ride using decentralized finance (DeFi) loans and cryptocurrency are on the horizon.
Why Would I Want a Cryptocurrency Auto Loan?
The question really should be, why would you ever want to consider a traditional auto loan when cryptocurrency loans are an option?
There are many reasons why more and more borrowers are turning to DeFi lending solutions like our own CarrDefi when it comes time to finance a new-to-them vehicle.
Here are just a few of the reasons to consider a crypto car loan.
Crypto loans provide a more practical application process.
In comparison to big banks, buying a car with a cryptocurrency auto loan doesn’t require a long, drawn-out application process.
Crypto-backed auto loans are more private and secure.
Another benefit of crypto asset-based lending services is that they don’t require applicants to provide any financial information prior to receiving a credit decision like banks do today. This allows for privacy while also reducing fraud risk because fraudulent applications can be rejected without ever being approved in the first place.
Plus, because we use DeFi lending pools in our CarrDefi program, you don’t need a credit score or other documentation from traditional lenders like banks. You just need access to cryptocurrency in order to get started with crypto-backed auto loans.
Cryptocurrency auto loans are highly flexible.
You can choose whether your loan is credit-based or asset-based. With asset-backed crypto auto loans, your credit file will not be impacted by the loan, and whether you qualify or not does not depend on your credit score.
Crypto auto loans offer competitive interest rates.
The interest rate for crypto loans is often lower than traditional financing options, and there are no prepayment penalties for moving early on payments.
Crypto auto loans benefit other cryptocurrency holders like you - not the big banks
With DeFi loans, you’re keeping your money out of the pockets of big banks and, instead, benefiting other cryptocurrency holders like yourself. Big banks are using your money to grow their business, but when you fund your acquisition of a new vehicle with cryptocurrency, that money stays in the market, circulating within cryptocurrency ecosystems. Some of your crypto collateral might even appreciate over time.
Decentralized auto loans are unbiased.
Another benefit of crypto car loans is that they’re unbiased. You can get car loans regardless of your background, education, credit score, or other factors.
Regardless of who you are, what your background may be, or where you live – crypto vehicle financing gives everyone the same chance to get a loan and buy their first crypto-powered ride.
What are the Types of Crypto Loans for Cars?
Crypto auto loans are not one-size-fits-all. They come in a variety of shapes and sizes.
Cryptocurrency-backed auto loan
A crypto-backed car loan is a type of auto loan that uses a borrower’s own cryptocurrency as collateral. The crypto serves as the guarantee for the vehicle, and it also reduces any risk to investors because they know their investment will be paid back in cryptocurrency if a default occurs.
Credit-based crypto car loan
Much like a traditional car loan, DeFi lending platforms like CarrDefi can give borrowers the option of using their credit score to secure a loan. This is a great option for individuals with good credit who don’t want to tie up their crypto assets as collateral for their auto loan.
Where to Apply for a Crypto Car Loan
The Carnomaly ecosystem will soon support crypto auto loans through its CarrDefi platform, a DeFi-based financing solution for auto lending.
Applying for a loan is easy. All you need to do is fill in the short application form, and our digital finance team will find a loan that matches your needs. Based on what cryptocurrency assets you have available, they can help match you with the best possible terms—including 48- or 60-month loans at reasonable rates of interest.
You can choose which cryptocurrency to receive your loan funding in, from Bitcoin, Ethereum, CARR, or others, and your funds will be distributed within 30 days of the DeFi lending pool being fully funded.
Beyond 2021: Crypto Auto Loans Are the Future of Car Financing
Crypto auto loans are quickly becoming a practical alternative to traditional auto loans. They are more transparent, secure, affordable, and less biased than their traditional counterparts.
They offer borrowers the opportunity of leveraging either their credit or cryptocurrency assets for collateral while allowing them to pay for their new vehicle in the cryptocurrency of their choice.
CarrDefi is your ticket to the future of car buying. If you’re interested in learning more about how DeFi auto loans work and stay up-to-date on the rollout of the CarrDefi platform, sign up for our newsletter or connect with us on Telegram for regular updates.