Wednesday, January 19

Chile: now you can request a credit with bitcoin in Buda

Key facts:
  • Buda now allows you to request a loan backed in bitcoin with 1% monthly interest.

  • The loan is granted instantly and does not require signing papers or talking to executives.

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The cryptocurrency trading company Buda launched a line of credits with bitcoin (BTC) that its users in Chile can request from its application as of December 9.

According communicated the company, the loan application process is instantaneous. It does not require signing papers or talking to executives to be approved. It should only be ordered in your mobile application and “If you have bitcoins, the money will be in your account in minutes,” they say in Buda.

Buda offers loans for bitcoiners hodlers

The product is intended for bitcoin hodlers. That is, for people who have and want to keep their investment in bitcoin for a long time because they believe that its value will rise in the long term. This was also confirmed by Guillermo Torrealba, the co-founder and director of Buda.

Those who are bitcoin hodlers and want money, either to invest more or for personal use, can apply for a loan at Buda with 1% interest per month using a 2: 1 overcollateralization system. This policy means that the user can request a credit of 50% of the value of their funds in the cryptocurrency.

For example, if a person owns 40,000 pesos in bitcoin, he can request a loan of 20,000 pesos. In this case, the company keeps the 40,000 pesos saved as a backup until the user returns the entire 20,000 pesos plus 1% monthly interest. Once the full payment is completed, the company returns the endorsement.

This 2: 1 overcollateralization system is very popular in the loan services of exchanges (cryptocurrency trading platforms). One example of this is Coinbase, which recently also launched bitcoin-backed loans, with the difference that it only allows you to request one of 40% of the funds.

Guillermo Torrealba stated that soon Buddha will also allow credits backed with other cryptocurrencies with an overcollateralization of 3: 1. The head of the exchange also announced that they plan to add more fiat currencies, such as US dollars (USD), Colombian pesos (COP) and Peruvian soles (PEN).

Users decide the amount of installments to be paid on the loan backed with bitcoin

Buda Allows users to choose the duration of the Bitcoin-backed loan at the time of application. No penalties or extra costs are applied in the event that a month is not paid, as long as even 1% interest is paid. In the event that it is not possible to pay in full within the established installment period, you can apply for an extension.

The cryptocurrency platform Buda It also allows you to advance installments to save the monthly interest. This means that the sooner the debt is paid, the cheaper it will be, that is, the less interest cost it will have.

Something fundamental to keep in mind is that the value of the backup funds is fixed once the loan is requested, according to the price of the cryptocurrency at that time. This means that it is subject to volatility.

If bitcoin goes down and the loan reaches more than 50% of the support, Buda advises the user to add more money to the support or pay more fees to avoid exceeding the percentage. If it exceeds 80% at some point, the company will proceed to sell part of the funds to pay the debt, since they will have in custody the bitcoins provided as collateral by the user.