Unchained Capital Review – Pros & Cons of Their Bitcoin Loans
- No credit check
- Instant loans within one day
- Fast online application
- Transparency (assets can be monitored)
- Highest security standards
- Certain US states restricted
- No private loans outside US
- High minimum loan amounts
- Possibility of margin call
Cryptocurrency-Backed Loans – New Kind of Financial Services
Unchained Capital is one of the first collaborative asset management firm, that offers financial services based on bitcoin. Founded by Joseph Kelly and Dhruv Bansal in January 2016, the company aims to reduce risk commonly associated with full custody of cryptoassets, enabling its customers to achieve greater transparency and security.
Services offered by Unchained Capital not only provide higher security for your bitcoin and ether but also focus on delivering vaults and loans for that cryptocurrency. The company is located in Austin, TX, employing at the moment more than 15 people. The team behind the DeFi¹ company consists of highly experienced entrepreneurs and engineers, ensuring that provided services meet all industry standards.
Services Offered By Unchained Capital
The company’s focus is to provide collaborative asset management: cryptocurrency-based loans and secure vaults for your cryptoassets. When it comes to loans, Unchained Capital offers you to borrow U.S Dollars against your bitcoin or ether – all with a focus on transparency and excellent customer service. The company also provides multisignature cold storage solutions, enabling you to achieve maximum security on your cryptocurrency.
Secure Bitcoin Vaults
As your assets increase in value, it is essential to ensure maximum safety. You will be able to improve it, while still preserving your control by using Unchained Capital multisig solutions. Vaults offered by this company will be suitable for:
- Individuals, seeking to strengthen the protection of owned assets by state of the art multisig solutions;
- Business, searching to utilize multisig account hierarchical access with a trusted partner;
- Joint accounts, aiming to share keys among individuals.
Vaults offered by Unchained Capital can be both client or institution controlled. Client-controlled solutions enable you to retain sovereignty, where every user controls 2 out of 3 private keys. In such a model, Unchained Capital serves only as a backup or a trusted co-signer. When deciding to opt for a multi-institution solution, users will be only able to control 1 of 3 private keys, Unchained servers as a co-signer, with a third-party institution acting as a backup.
Utilizing this service has many advantages when compared to the only hardware wallet. First of all, even if a single key is compromised, the platform will enable you to create a new one and transfer funds to a new vault. Unchained creates new addresses with every withdrawal, which significantly increases security. The platform offered by Unchained Capital also supports both Trezor and Ledger hardware wallets, and the company never has access to a user’s private keys. As for now, the multi-institution co-sign platform is the safest solution, used even by the biggest cryptocurrency exchanges in the world.
Cryptocurrency Backed Loans
Unchained Capital cryptocurrency loans enable you to receive up to $1,000,000 within the same business day by following three simple steps:
- Loan application. Your first step will be to fill a secure online form. As a customer, you will be able to pick one of few, predetermined loan plans – 3-month, 6-month, 1-year, 2-year, and 3-year+.
- Contract signing. If your application is approved, you will be able to apply and receive a loan.
- Receive your funds. Unchained Capital will allocate you a unique address that will enable you to monitor your collateral during the loan.
Popular Use Cases for Bitcoin Backed Loans
People applying for Loans against BTC collateral are intend to use their temporary Bitcoin cash out for:
- Pay off older credits, such as credit card dept or alike (this way BTC-backed loans can be used to enhance credit score immedately)
- Tax payments, e.g. for tax due to crypto sales in the previous season
- Other investments, e.g. rental property or other hard assets
- Home renovations
Just to mention the most popular examples Bitcoin backed loans are used for, as stated on unchained-capital.com.
The US American company offers simple and transparent rules:
- Term length: 3-60 months;
- Loan-to-value ratio: 35-50%;
- U.S loan minimum: $10,000;
- International loan minimum: $100,000.
What are the benefits of the loan offered by Unchained Capital? First of all – freedom. All you need to receive money is bitcoin or ether. Your credit score does not matter, and the loan will not influence it. Please keep in mind that your cryptocurrency will serve as collateral – you need to deposit it to an address provided by Unchained. If you are not able to pay your loan back, stored assets will be used to cover the payments.
Unlike with traditional financial services, you will be able to receive a cryptocurrency-backed loan within one day. All you need to do is register an account and fill out a simple application. Please keep in mind that although your application can be approved, and the funds wired out within one day, it might take some for the money to be deposited into your bank account.
How To Get Loan Offered By Unchained Capital, Step By Step
To receive a loan, every customer needs to register a user account properly. To do that, you need to be a resident of one of the authorized states. Also, the company will check your eligibility during the process of verification. To successfully register an account, you will have to provide:
- Name, surname;
- Date of birth;
- Social Security Number;
- Business name, if any;
- Email address;
- Mailing address.
Providing the above information is a part of KYC (Know Your Customer), and it’s a mandatory and crucial procedure performed by any financial institution.
Unchained Capital can only serve customers from states in which they hold an official Finance Lender License. Because of the local restrictions due to missing official licensing, personal loans are not available in the state of Alabama, Idaho, Louisiana, Maryland, Michigan, Mississippi, Missouri, Montana, Nevada, New York, North Dakota, Ohio, South Carolina, Tennessee, Vermont, and Washington. Any other state not listed above is eligible.
When it comes to business loans, additionally to the information stated above, every business needs to provide information about all directors, officers, and shareholders with more than 20% ownership. Furthermore, business loans are not yet available in the state of Alabama, Nevada, New York, North Dakota, South Dakota, Tennessee, and Vermont. Any other state not listed above is eligible.
Unchained Capital also offers international loans, but the eligibility will depend on the jurisdiction, determined during the process of registration. Please keep in mind that you will be able to receive a foreign cryptocurrency-based loan can only for a commercial purpose, and with a minimum of $100,000.
Unchained Capital Loan Versus Credit Score
Unchained Capital does not perform a credit check and does not report any information to any credit bureau. Loan offered by Unchained Capital does not affect your credit score, and the company might only perform a soft pull³: a report listing your loans, payment history, and collection accounts.
Unchained Capital accepts only bitcoin and ether as collateral for its crypto-secured loans. Please keep in mind that hard-forked coins such as bitcoin cash won’t be accepted. When it comes to Ethereum, only ether is approved, and the company doesn’t support any ERC-20 tokens. With Unchained Capital, you can receive the loan within one day.
How Much You Can Borrow
The loan minimum depends on the loan type. For domestic, U.S based loans, a customer can borrow from anywhere from $10,000 to $1,000,000. For international loans, you can apply for $100,000, up to $1,000,000.
What Does The Loan-to-Value Ratio Mean
Loan-to-Value ratio is the calculated amount of loan you will be able to receive, based on the amount of collateral you are willing to stack. As for now, you will receive from 35-50% of the deposited bitcoin or ether. For referencing the value of your cryptoassets, the company is using the CME FC Real-Time index, with data polled from the biggest cryptocurrency exchanges: Bitstamp, CoinBase Pro, itBit, and Kraken.
As for an example, let’s assume that you are a U.S customer, interested in receiving a loan backed by your bitcoin, and you allocated 10 BTC for this purpose (with a price of $8,200 per BTC). By filing a loan application and signing a contract, you will be able to receive from $28,700 to $41,000 and a repayment plan divided to anywhere from 3 to 60 months. The amount of the loan will be calculated by the loan-to-value ratio, and it can range anywhere from 35 to 50% of the total value of the assets. You can apply for the loan both as an individual or a company.
Loan Terms, And What You Need To Know
Both bitcoin or ether-based loan has a repayment plan ranging from 3, up to 60 months. To receive the money, you need to deposit the right amount of collateral either into Unchained multi-institution, multisignature address, or single-institution multisignature address. The company will not charge you any repayment fees, and only loan principal and interests need to be paid down.
As a customer, you need to follow a repayment plan. Interest has to be paid every month, and the principal at once, or in several installments during the loan. Keep in mind that if you receive a margin call, the deposit needs to be made as soon as possible, or your collateral will be liquidated.
Interest Rates On Bitcoin Loan
Interest rates and fees on cryptocurrency-based loans apply to loans at a 50% loan-to-value ratio. Interests are not fixed and may depend on the loan amount, origination fees, and even state of residency. However, generally they may start from 8.50% and range up to 13.50% (annual rate).
Let’s assume you are interested in a $20,000 loan for one year, at 10.50% interest rate and a 1% origination fee. Such loan will result in monthly interest payments of $172.60, for a total of $2,071.20 during the 12 months. You will also be required to make a one-time payment of $20,000 and pay your interests. Principal can be paid in full or in installments, interest must be paid every month.
In the case of Unchained vaults, deposited collateral will be either stored on a multi-institution or single-institution, multisignature address, and you will be able to pick the most suitable service by yourself. When it comes to cryptocurrency loans, only multi-institution, multisig solution can be used. Keys to the collateral will be distributed among three different parties: client, Unchained Capital, and trusted 3rd party – Citadel SPV². Each party will be holding a single key, and two out of three keys are necessary for any transfers.
This solution ensures that the client won’t be able to withdraw the collateral before paying back the loan and interest. As from the client-side, you will be able to safely store and manage your cryptoassets via one of the supported hardware wallets: Trezor or Ledger.
As cryptocurrency-based loans are still new services, and the markets tend to be highly unstable, there is always a risk of a company going bankrupt. To secure yourself for such a possibility, you need to make sure that the funds will not be able to be withdrawn without your knowledge. Unchain Capital works with Citadel SPV – associated third party agent that co-signs transactions. Citadel SPV acts as a fail-safe: if Unchained disappears or declares bankruptcy, the funds will not be able to be withdrawn by the loan provider alone.
Because of the nature of the service itself, your collateral is not able to be insured by any government-regulated institution. If the Unchained Capital goes bankrupt or disappears, your funds will be frozen, gone, or unable to be accessed. Is such a situation probable? Low Loan-to-Value ratio offered by the company makes sure such a situation will never take place. Furthermore, in case of sudden cryptocurrency price drops, you will receive a margin call. Such a system alone makes sure Unchained Capital is not able to go bankrupt.
Bitcoin Price Fluctuation, and Its Effect on the Loan
Unchained Capital developed a system that will ensure your collateral is safe no matter what – both if the price goes down or increases.
What Happens If The Price Of Bitcoin Decreases?
If the price of the underlying asset decreases significantly, you will receive an email notification. The warning will also serve as a margin call, telling you that your collateral is in danger of being liquidated. You will have to bring the loan-to-value ratio back to the original value, either by: Depositing additional collateral, or submitting a principal payment in USD.
What Happens If The Price Of Bitcoin Increases
If the principal ratio exceeds 250%, you will be able to request a refund of deposited collateral. It would be best if you kept in mind that Unchained Capital will only honor requests with at least 30 days, counting from the start of the loan and last margin call.
Customer Support At Unchained Capital
If you have any questions concerning services offered by Unchained Capital, you can reach them at email@example.com or by calling +1 (844) 486-2424 during regular business hours, CTD.
Advantages And Disadvantages Of Services Offered By Unchained Capital
Cryptocurrency backed loan is a new and innovative product, that offers many benefits when compared to traditional fiat loans:
- The loan doesn’t require a credit score check and doesn’t affect the score;
- You can receive the loan within one day;
- Simple, easy to fill application;
- Transparency – you can monitor your assets;
- Security – multisig, multi-institution cold wallets.
Keep in mind that every financial service will have some disadvantages. In the case of Unchained Capital, there are:
- Restrictions – many states are not yet supported;
- High minimums – $10,000 for individual and $100,000 for company loans;
- Possibility of margin call – cryptocurrency markets are unstable.
Taxes And Unchained Capital: Everything You Need To Know
Do you need to pay tax on your crypto loan? First of all, the IRS has not given explicit guidance on what you should do. Most likely, such loans will be considered analogously to traditional lending, where collateral (e.g., your home) is not subject to capital gains, as you are not selling anything.
We can say the same on the topic of tax-deductible payments. Also, here, the IRS has not given any specific guidance. Your situation may additionally depend on the loan itself: Is it an investment or for personal use? Furthermore, if you can receive a margin call, which will liquidate your collateral, and most likely, you will have to pay capital gains tax.
Reviews Of Unchained Capital
Cryptocurrency backed, centralized loans are an entirely new service and with the direct competition of DeFi Projects. Because of it, it is hard to find any reviews on both, and as opposed to DeFi, information about the total value of issued by Unchained Capital loans is not public.
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