Crypto Loans Explained: Types, Costs and How They Work

Updated 9 September 2026

A crypto loan can mean borrowing a digital asset, borrowing money against crypto collateral, or both. That distinction determines what you receive, what you owe and which price movements can make repayment harder.

If your goal is cash without an initial BTC sale, you are looking for a crypto-backed loan—not necessarily a loan denominated in Bitcoin. This guide explains the borrowing models so you can identify which one fits before comparing providers.

Explore Ledn’s Bitcoin-backed loan terms →

The main types of crypto loans

A centralised lender provides a loan under an agreement and manages verification, funding and collateral. A decentralised lending protocol uses smart contracts to manage an on-chain position. An interface may combine both models, so the brand on the screen does not tell you every party involved.

Separately, borrowing Bitcoin is different from borrowing dollars against Bitcoin. Debt denominated in BTC must be repaid in BTC or according to the agreement, exposing a borrower whose income is in dollars to a different price risk.

For a comparison of service models, read DeFi versus CeFi loans.

The currency you owe changes the risk

Imagine two hypothetical borrowers. One owes $10,000 secured by BTC. The other owes an agreed quantity of BTC, while earning income in dollars. A rise in BTC's dollar price can make the second borrower's repayment more expensive in dollars; the first still owes a dollar-denominated balance plus its applicable charges.

A fall in BTC creates a different problem for the first borrower: the collateral may no longer provide enough cover under the loan's LTV rules. “Crypto exposure” therefore does not describe one uniform borrowing risk.

Before choosing a product, identify the loan currency, repayment asset and collateral separately. The correct comparison is between arrangements that provide the same usable funding, not two products sharing the word “crypto.”

How collateral and LTV work

Loan-to-value is the outstanding balance divided by the current value of collateral. A $25,000 balance against $50,000 of collateral is 50% LTV. If the collateral falls to $40,000 while debt is unchanged, LTV rises to 62.5%.

Interest and fees can increase the balance. Adding eligible collateral or making a repayment can reduce LTV. The original loan amount alone is therefore not enough to monitor the position.

Where a Ledn Bitcoin-backed loan fits

Ledn's standard product uses native BTC to secure a USD-denominated loan, with available payout methods depending on the jurisdiction. A borrower retains BTC price exposure but gives up unrestricted access to the pledged collateral until release under the agreement.

The standard term is 12 months, with no required monthly payments before closure. That can be relevant to a planned cash need with a repayment source, but interest still accrues and the maturity must be managed. This is neither an unsecured loan nor a flash-loan product.

If you already need liquidity on-chain against a different supported token, a lending protocol may be another route to evaluate. If you have no eligible collateral, a BTC-backed product does not solve that eligibility gap. Read the current Ledn terms for the actual offer.

What to compare before you apply

Compare the payout asset, APR and fees, rate type, term, early repayment, liquidation threshold and collateral-use rights. Check eligibility for your country and, where relevant, your state or province. Verify whether the purpose of the loan is permitted.

If a product uses a wrapped Bitcoin token, identify the issuer, redemption process, blockchain and lending market. A token designed to represent BTC introduces dependencies beyond Bitcoin itself. Our loan security guide explains the questions to ask.

A practical application sequence

Choose the amount and a realistic repayment source. Complete required verification, review the offered agreement, follow the platform's collateral instructions and confirm the available payout route. After funding, monitor the balance and collateral rather than treating the loan as finished paperwork.

For the detailed Ledn process, use how to get a Bitcoin-backed loan. For provider comparisons, use crypto loan platforms.

Choose the borrowing model before the provider

Write down what you pledge, what you receive and what you must return. Then compare the total cost, custody and liquidation rules of products that fit. For practical next steps, read how to get a Bitcoin-backed loan.

This article is for general information, not financial, investment, tax or legal advice. Borrowing involves interest, fees and the risk of collateral liquidation. Eligibility and terms vary by jurisdiction and may change; the applicable agreement governs. Consult qualified advisers for your circumstances. Read Ledn’s Risk Disclosure Statement and Disclaimers.