Why are Unchained Capital's interest rates higher than other lenders?

We never rehypothecate (or lend out) your bitcoin that is held as collateral for your loan to offset our cost of capital. The risk of doing so is total loss of client collateral.

You can read more about rehypothecation in our Ultimate Guide to bitcoin-backed loans.

Example of loan terms offered by a lender who engages in rehypothecation for a 12 month loan with a principal of $10,000:

LTV Interest Rate Origination Fee Total Cost of Loan

50%

9.75% 2% $1,161.64
35% 7.9% 2% $979.18

Lenders who rehypothecate client collateral can also have extreme restrictions on withdrawals.  This can include limits on the amount withdrawn, frequency of withdrawals, or imposing lower LTV requirements for withdrawals after origination.

 

The same 12 month loan with a principal of $10,000 at Unchained Capital (no rehypothecation):

LTV Interest Rate Origination Fee Total Cost of Loan
40% 11.00% 1% $1,184.93

While Unchained Capital loans do cost slightly more, the risk of total collateral loss due to rehypothecation is completely eliminated, ensuring that if the loan is repaid, collateral is returned in full to the borrower.  Withdrawals from loans can be requested 30 days after the last withdrawal or margin call and when the Collateral to Principal ratio rises to 300%.  Excess collateral can be withdrawn so the CTP ratio is reduced to 250%, the same level as when the loan originated.


Essentially, the trade-off that is made for opting to give your bitcoin to a rehypothecating lender to save a couple percentage points is the risk of total loss of your bitcoin.

 

*All the above loan examples assume a billing period of 30 days.