What happens when a crypto millionaire walks into a bank looking for a loan?
Most banks won’t issue a loan with digital assets as collateral. SALT lending has stepped in to fill that gap. As long as you have some crypto, you can secure a loan.
Seeing how inefficient traditional lending is in this digital age, Shawn Owens, CEO of SALT, decided to start a platform on the blockchain that would give crypto holders access to loans based on the collateral of their crypto currency.
With no credit scores to worry about and instant access, it has become a very attractive way for people to secure lending. Not least of whom are the unbanked.
What is SALT Lending?
SALT, Secured Automated Lending Platform, is as mentioned a collateral based lending platform that lets you put up your digital assets, ie, crypto currency, in exchange for fiat cash.
The platform is tethered to ERC-20 tokens on the Ethereum blockchain.
Using the blockchain, loans are made via smart contracts. The SALT Platform is automated, efficient, and cryptographically secure.
Traditional lending is sometimes difficult to secure, always expensive and slow and sometimes unsafe as central servers can be hacked. Sending personal information into nefarious hands.
By utilizing the blockchain, SALT makes access to capital inexpensive to transfer, store, and liquidate. And the trustless system of the blockchain means you won’t have to wonder how secure the lending institutions servers are. All the transactions are on the chain, validated and immutable.
What are the Benefits of SALT Lending?
Using a system that requires no credits checks means that there is really no barrier to entry when it comes to securing a loan. If you have the collateral, you will get the loan.
Lenders post what the terms and interest rate they are looking and users can shop around to find the loan that best suits their needs. This puts a lot of power in the hands of the person getting the loan.
There is also no need to even announce what the loan is going to be used for. In a traditional lending scenario you have to apply for a special loan for auto, mortgage or other types. On the blockchain nobody cares what you want the money for.
What is probably the most attractive reason to get a loan from SALT, is for arbitrage if you’re looking to buy more crypto currency.
It would be very sad to have to cash out your bitcoin, for example, to buy another coin and watch as Bitcoin has a rally and you no longer have any. In this case, you can put up the Bitcoin as collateral, secure a loan instantly and buy the tokens you want. Even better is that during the time of the loan terms, if the value of your digital asset collateral rises, you are making money on that, too.
With the volatility of the crypto exchange market, hours count. If you have to waste an entire day at the bank trying to get a loan to buy coins, then have to wait days for the funds, you will likely miss out on a prime buying opportunity. SALT gets you cash instantly and directly into your bank account.
There are no penalties for paying off a loan early, unlike with most banks.
And with many tangible assets, such as land, jewelry and intellectual property making their way onto the blockchain becoming digital assets, it means easier liquidation of just about anything.
How Does SALT Lending Work?
To use the SALT lending platform, you first need to pay to become a member.
There are three different membership types. For small loans up to $10,000 and terms of 3 to 24 months there is the Base membership which costs 1 SALT token per year (more about the tokens later). The Premium membership costs 10 SALT tokens per year and gives you access to up to $100,000 and a line of credit. Fiat currency is available in USD, EUR, JPY, RMB and GBP. Terms are 1 hour to 36 months. The Enterprise membership costs 100 SALT tokens. Including access to 1 million USD, with ad hoc currency selection and metered terms.
To create an account you only need to give your first and last name and email address.
As a borrower, you get matched automatically with some of the capital from SALT’s extensive network filled with lenders.
Throughout the term of your loan, your digital assets remain in an ultra-secure architecture that is fully audited.
To secure a loan you have to put up as collateral 125% of the loan. If you need $1,000, then you’ll need to offer $1,250. If somehow you are unable to repay the loan, then your collateral is deducted from the unpaid remainder and given to the lender.
This is important to remember, since with a traditional loan it doesn’t matter how much you have already repaid. Whatever collateral you used to secure the loan will be repossessed. This is another outstanding benefit of a SALT loan. If you borrowed $1,000 and only managed to repay $750, then you lose $750 and that’s it.
If the value of the assets used as collateral increases, the borrower can decide to add to the principal of the value of the loan, or withdraw some of the collateral.
What happens if the value of the collateral decreases? Addition collateral will be required to be provided or the monthly loan payment will need to be increased. The SALT Oracle smart contract issues a notice to the borrower alerting them to this so there are no surprises. If the borrower fails to do either of these then the smart contract issues a liquidation of the collateral automatically.
What is the SALT Token?
A SALT token is simply called a Salt.
How will Salt be used? The Salt token will be used for membership to the platform. It’s a fee for a loan in essence depending on what tier you want to be in for loan access.
So, unlike many new altcoins, it is not being used as a way to crowdfund the development of the platform.
There is a fixed supply of 120 million Salt tokens. As more borrowers buy memberships the value of the token will rise. Once a token is bought for membership, it is essentially given back to SALT to be then sold to somebody else for their membership and so on.
There are a few other crypto lending platforms, most notable EthLend. Which one will win the biggest market share? Well, nobody knows of course.
One thing is for sure, SALT and Ethlend and others will not be the last to offer digital asset collateral backed lending via smart contracts. The unbanked, crypto traders and anybody else looking to take advantage of this Brave New World emerging thanks to the innovations of blockchain technology will soon have an easier way to gain access to cash, no matter who comes out ahead.