BlockFi.com Review 2019 – Crypto Backed Loans by BlockFi
- Low loan interest rates
- Interest forgiveness at early pay offs
- Loans from $2,000
- Worldwide Loans
- No credit check at all
- Deposits securely stored at regulated custody service
- BTC, ETH, LTC & USDC supported
- Withdrawal fees (0.0025 BTC)
- Local restrictions
- No mobile app
Latest Update on Blockfi: The service is now also available in Maryland.
BlockFi is a cryptocurrency based wealth management firm that enables you to earn interest, borrow money, and grow wealth by using your cryptoassets. Founded in June 2017 by Zac Prince and Flori Marquez, this New Jersey-based company enables you to earn up to 8.6%* annually or receive cryptocurrency-backed loans with a loan-to-value ratio of up to 50%.
The company aims to provide the best customer service while simultaneously deliver state of the art safety systems for collateralized and stored assets. When it comes to the safety of your assets, BlockFi works with Gemini – a New York trust company, fully licensed by the New York State Department of Financial Services. What is more, because that the value-to-ratio on any loan can’t exceed 50%, you can be sure the company is trustworthy and highly unlikely to go bankrupt.
Services Offered by BlockFi
The company specializes in two kinds of services: Interest accounts that enable you to earn, or fast cryptocurrency-backed loans backed by bitcoin, ether, and litecoin.
BlockFi offers the opportunity to let your crypto work for you by earning interest on deposits.
The majority of crypto investors store their assets either on a custodial exchange or in cold storage for a more long term safekeeping. Although there is nothing wrong with such an approach, your investment will not yield any interest.
BlockFi enables you to deposit your assets to a secure address and earn up to 8.6%* interest annually.
*Other than with BlockFi crypto-backed Loans, interest rates on Interest Accounts are not fixed and compounded each month, so the rates stated on their homepage can vary.
Registration takes less than two minutes, and you will be able to start earning interest literally on the same day. Please keep in mind that the crypto interest account is not available for the state of New York, Connecticut, and Washington. You will not be able to open an account if you are a resident of Cuba, Iran, North Korea, Sudan, Syria, or any other country where there are sanctions in place.
Most probably, you are asking yourself if such a service is even worth it. Let’s assume that you received a 6% compound interest on your 2 BTC deposit. After a year, you will have 2.12 BTC, which by today’s rate (BTC at $8350), translates into $1000. Quite good, considering it was only a two-minute registration process.
How is the Interest Generated?
BlockFi generates interest by taking deposited assets and lending them to a trusted, 3rd party institutional and corporate borrowers. Such loans are also collateralized and have the same structure as offered by BlockFi crypto loans. That approach makes sure that risk is always correctly managed, with systems monitoring positions 24/7.
What is also important, BlockFi expectations are the same, as it’s customers. Therefore there is no conflict of interests. Because of how the business is structured, BlockFi will be the one taking loses, before any clients.
No Minimums and Fast Withdrawals
You can start generating interest on your crypto with minimum effort. After a two-minute registration process, you will be able to deposit any amount of cryptoassets you want, any time you want. When it comes to withdrawals, you should expect them to be released the same day. Nonetheless, keep in mind that withdrawals are not automatic, and the BlockFi reserves up to 7 days to process your request.
Cryptocurrency Backed Loans
With BlockFi, you are not only able to earn interest, but also quickly receive a cryptocurrency collateralized loan on your Bitcoin (BTC), Ether (ETH) or Litecoin (LTC), paid in USD or GUSD. Every loan is issued based on the loan-to-value ratio. From 2020 the service also supports the stable coin “USD Coin” (USDC).
It means you will not be able to get 100% of the current USD value on your Bitcoin, but up to 50%. Cryptocurrency markets are unstable and highly volatile, and this approach makes sure that exposure and risks are at a minimum. BlockFi offers both individual loans and professional business loans with approval time below one hour.
BlockFi Loans Explained
If you want to get a loan, fist of all, you need to apply for it. The procedure is easy, and it requires you to provide personal details, such as:
- Name, surname;
- Email address;
- Date of birth;
- Social Security Number (for U.S residents only);
- Phone number;
You will also be required to state a type of account (individual or business) and accept terms and conditions. Please remember that you need to be of 18 years or older to register an account. Because the crypto interest accounts and loans are provided within one personal profile, you will not be able to get a loan if you are located in the state of New York, Connecticut, and Washington. You will also not be able to open an account if you are a resident of Cuba, Iran, North Korea, Sudan, Syria, or any other country where there are sanctions in place.
Crypto Loan and Credit Score – Will it Get Affected?
Loans offered by BlockFi are collateralized, which means backed by assets. Because of that, there is no need or requirement to check your credit score. You will quickly get the loan even with bad credit, and the result of the loan will not affect your credit score at all. Unlike other crypto loan companies, BlockFi does not perform even soft pull.
As BlockFi customer, you will be able to receive money with a loan-to-value ratio of up to 50% on bitcoin, ether, or litecoin. The company also offers a handy loan calculator that will enable you to calculate in real-time how much collateral you need. For example, as of 10/14/2019, to get a $10,000 bitcoin-based loan with LTV of 50%, you need around 2.45 BTC. By opting for a BlockFi loan, you will be able to get approved even within an hour, counting also registration process.
How Much BlockFi Can Offer You
BlockFi offers one of the most flexible loan amounts. Even as an individual, you will be able to get up to $100,000,000, with a minimum of $2,000. Rules apply for all supported cryptoassets: bitcoin, ether, and litecoin.
What is LTV: Loan-to-Value Ratio
Loan-to-value is an essential factor that determines how much collateral you need to do deposit, to receive a certain amount of USD or GUSD. The collateral ensures that the lender will be incentivized to pay the loan, and it’s used to pay the lender in case if the borrower is unable to pay back.
Let’s assume that you want to take a $20,000 loan on your bitcoin. As of 14/10/2019 (BTC price at $8350), you will be able to choose a loan-to-value ratio of 20%, 35%, or 50%. To receive the money, you will have to deposit 12.27, 7.01, or 4.91 BTC. Every customer can choose its own LTV, which will not affect the application process.
Every loan issued by BlockFi as a 12-month duration, with payments that can be made at any time, without fees or penalties. To receive the funds, you will have to deposit your cryptoassets into account, which will be collateralized after receiving funds. Please keep in mind that although you can be approved to receive the money within an hour, in case of USD, it might take up to a few days before your wire transfer appears. You can omit it by requesting the payment to be done via blockchain by GUSD.
BlockFi has a well-defined structure of interest rates paid during the loan. Rates start from 4.5%, depending on the loan amount and loan-to-value ratio you choose. On the BlockFi website you can calculate the exact amount of interest you’d have to pay in USD. Calculate here.
The interest rates agreed at the beginning of the loan term are fixed in the case of loans.
Assuming that you took a $20,000 loan with a 50% loan-to-value ratio, during the 12 months, your total interest will be $2,250 or $187.50 per month. Keep in mind that if you pay the loan early, you will not need to pay the rest of the interest. When it comes to payment structure, you can be entirely flexible, or even prepay – it’s all up to you. BlockFi enables you to pay the loan in various ways:
Cryptocurrency. Allows for the payment to be processed during the same business day. You will be able to pay your loan balance with PAX, USDC, or GUSD. Funds are usually received within 10 minutes and processed within an hour. You will also be able to pay your balance with the collateralized coins, with 1% trading fees. In such a case, a portion of your collateral will be liquidated while the rest transferred to your address.
Wire transfer. You will have to send a wire to the BlockFi loan processor, which usually takes from 1 to 2 business days. Once the transfer is received and processed, BlockFi will release your crypto back to the address.
ACH payment. Processing time from 5 to 10 business days. Please keep in mind that ACH takes five days to clear between banks and 48 hours for the funds to be marked as processed.
Refinancing after 12 Months
The regular loan period is restricted to 12 months, however, Blockfi offers the possibility to refinance your loan cryptocurrency backed loan after that period. So customers can take a new loan to pay off the old one which takes away the pressure that can occur when having to be able to pay the loan off in USD within or at the end 12 months.
Loan Safety Measures
BlockFi incorporated many safety layers that ensure maximum security of your funds and personal information. First of all, the company enables you to set a 2FA authenticator via the Google Authenticator app available for Android and iOS devices. Because the app generates a new code every 30 seconds, it ensures only the person holding the phone can access the account.
When it comes to the safety of your assets, every bitcoin, ether, and litecoin deposited onto the platform is stored offline on a cold storage wallet. For that, BlockFi works with Gemini, a New York-based, licensed custodian exchange, and trusted 3rd party. That way, your funds will be safe even in case of bankruptcy or disappearance of BlockFi, as stated in Article 9 of the Uniform Commercial Code.
Cryptocurrency Price Fluctuations and it’s Effect on BlockFi Loan
Cryptomarkets tend to be highly volatile, which may directly affect the loan. Because of that, BlockFi operates on the loan-to-value ratio. That enables you to receive 20%, 35%, or 50% of the deposited assets as a loan, counteracting the price movements.
What if Bitcoin, Ether, or Litecoin Price Goes Down?
As we all learned in the recent bear market, prices of crypto can drop significantly – up to 90%. If such a situation occurs, the value of your collateral can decrease considerably, and you might receive a margin call. When it happens, you will be required to take immediate action, depositing either more collateral or paying part of the loan back. If you decide not to take action and the loan hits the margin, your position will be liquidated. A first margin call occurs at a 70% loan-to-value ratio, where you got 72 hours to take action. If your loan reaches 80%, a portion of your collateral will be sold.
What if Bitcoin, Ether, or Litecoin Price Goes up?
It’s not uncommon to see bitcoin moving 30%, or even 50% during a month. If that occurs, any gains received will be yours to keep after the loan is paid. You will not be able to withdraw part of the collateral as the value appreciates, but nothing stops you from paying the loan via the collateralized crypto. You don’t need to worry about any airdrops or coin hard forks. If Gemini supports them, you will receive additional coins after paying the loan.
BlockFi Customer Support
BlockFi is known for its highly professional and reliable customer service. If you have any questions regarding the service or want to learn more, feel free to contact them at email@example.com or by phone: 646-779-9688. You will be able to receive help during regular business hours, EST.
Advantages and Disadvantages of Using BlockFi
Like any fictional company, also BlockFi has its advantages and disadvantages. Firstly, let’s look into the pros:
- No Penalties. With BlockFi, you will not receive any penalties when trying to withdraw your funds early.
- Interest forgiveness. When you pay the loan early, you will not have to pay any interest, as calculated for the regular 12-month period.
- No minimums. You can start earning with BlockFi with any amount of cryptocurrency.
- BlockFi offers monthly compounding interest. It means that every payment is calculated each month, and based on your balance.
- Safety. Deposited crypto is securely stored and managed by Gemini – a fully regulated, New York-based trust company.
- Low loan interest rates compared to other loan companies
When opening an account, you also need to consider some disadvantages of BlockFi offer:
- Withdrawal fees. BlockFi has quite high fees on bitcoin and eth withdrawals (0.0025 BTC or 0.0015 ETH)
- Withdrawal time. BlockFi crypto withdrawals may take up to 7 business days to be processed.
- Web-only service. As for now, BlockFi doesn’t support iOS or Android-based apps.
- Local restrictions. Because of the local law, not everyone will be able to receive the loan.
BlockFi Crypto Services and Taxes
As with any financial gains, you will need to pay taxes on some of the services offered by BlockFi. Most noticeable are tax payments on BlockFi Interest Accounts. You receive interests monthly, and you will have to pay capital gain taxes. You might be taxed on short or long term capital gain: it all depends on how long you hold your investment. Sounds straightforward, but it’s not. Let’s assume you received again on your bitcoin, while the bitcoin itself decreased in value. In theory, you are at a loss, and there is no capital gain.
When it comes to crypto loans, the situation can be even more complicated. Assuming that crypto loans will be treated as a regular loan, you don’t need to pay any tax. Keep in mind that this material has been prepared for informational purposes only. You should consult your tax advisors for an accurate statement.
BlockFi is a quite popular company with many reviews, with the majority of them being positive or even very positive. People using their service are happy with the offer, with pros significantly outweighing the cons. One thing is sure: if you are looking for a trustworthy and reliable company offering crypto loans, you can’t go wrong with BlockFi.