Student loans and DeFi: What should you know?
Paying student loans don't have to be painful. DeFi is here to help you out, learn how. You have probably experienced the devil called student loans. If not, you might know someone with experience of dealing with them. If you think that paying for these is a difficult task, then think again. Now, you can pay these loans through cryptocurrencies, especially DeFi. This is possible due to the ever-growing presence of innovative DeFi (decentralized finance) platforms. In the latest edition of cryptocurrency latest news and blogs, we will talk about that. Although they are risky, they are worth exploring. If you are wondering about DeFi, here's a refresher. DeFi works on the concept of Blockchain to transfer money across different networks, using smart contracts. These contracts execute themselves when certain factors are met. DeFi can be used to transfer financial services, like loans and insurance. DeFi makes finance accessible to everyone, irrespective of a person's background, credit score, etc. Both collateralized and uncollateralized loans, along with trading, borrowing and lending would be available. Why choose DeFi? Because of the better interest rates (sometimes close to 0). The repayment method has a flexible payment option, one can skip a month or two, and then pay the entire amount. Yes, it will not affect the credit score as well. And smart contracts do not care about credit scores. So you don't need it to access financial services. You can take a loan against a cryptocurrency asset, and keep an eye on price levels, and settle debts. It also incentivizes borrowing against a loan and attracting liquidity and gaining rewards. People will have different governance tokens, for applying the day-to-day protocols.
Stablecoins will be a superior alternative to cryptocurrency loans. Why? Because they are quite stable, against fiat currencies. DeFi makes the concept of loan transfer and management easy. And people can get tokens and rewards after selling even a fraction of the loan. Aave is another cryptocurrency worth considering while dealing with DeFi. But if you want to know more in detail, you must check out LTV (ratio between loan and collateral). It will fluctuate through the loan's tenure because cryptocurrencies can be quite volatile. Most DeFi loans are based on Ethereum, as they can show price gains. If the volatility is lowered, debt value will be lowered too, but liquidation risk may arise. The interest rates will also be fluctuating, across different platforms and networks and for different cryptocurrencies and protocols. If you want, you can choose the option of self-repaying loans. With the help of yield farming and capital (collateral), it can generate interests to pay the loan back on time. You need to consider the risks while choosing this option too. This includes liquidation, variable rates, smart contract issues (bugs and security issues), and costs. Whatever you choose, always research the cryptocurrency latest news and blogs. You must employ your strategies to get the best out of DeFi loans. You know these things are subject to market risks. You must be careful while dealing with these loans. If you need help, take help from an expert.