How to Borrow Against Bitcoin in 2025

Many Bitcoin holders are using Bitcoin-backed loans as a way to access funds while retaining their holdings. Whether you need cash for an investment or expenses, Bitcoin loans offer a flexible alternative to traditional credit systems. This guide will walk you through everything you need to know to get started.

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How To Borrow Against Your Bitcoin Step-By-Step With Ledn

1. Assess your financial circumstances

Before applying for a Bitcoin loan, evaluate your financial situation, including your income, expenses, and existing debts, to ensure you can comfortably manage a new loan. Consider the risks and benefits associated with Bitcoin, and pay special attention to how market fluctuations might impact the loan's terms. It’s always a good idea to think about the purpose of the loan, set a realistic borrowing limit based on your financial capacity, and plan for repayments.

2. Create or Log Into Your Ledn Account

If you don't already have a Ledn account, you'll need to create one. Visit the Ledn website and sign up by providing the required personal information and going through the verification process.

If you already have an account, log in using your credentials.

3. Go to the Loan Section

Once logged in, go to the section related to loans. Ledn offers several types of loans, so you will need to choose the one that best suits you.

4. Select the Type of Loan

Decide whether you want a Bitcoin-backed loan or another type of loan that Ledn offers. 

5. Enter Loan Details

When applying for a Bitcoin loan, you’ll need to specify the amount you want to borrow and the Bitcoin collateral you’re willing to provide. A Custodied Bitcoin-backed loan ensures the collateral is held by Ledn or institutional funding partners, meaning it cannot be lent out to generate interest.

6. Review Loan-to-Value Ratio (LTV)

Ledn will provide information on your loan-to-value ratio. This ratio indicates the outstanding amount of the loan in relation to the value of your Bitcoin collateral. Ensure you are comfortable with this ratio and understand its implications. 

The starting LTV for all Ledn loans is 50%.

7. Submit Loan Application

After entering all the necessary details and reviewing the terms, submit your loan application. 

8. Wait for Approval

Once submitted, your application will go through a review process. Ledn will typically respond with a loan approval within a day, ask for additional information, or provide details on the next steps.

9. Review and Accept Loan Terms

If your loan application is approved, Ledn will provide you with the loan terms. Read through these terms, including interest rates, repayment schedule, and any fees or penalties.

10. Deposit Collateral

If you agree to the terms, you'll need to deposit the Bitcoin collateral. Follow the instructions provided by Ledn to transfer your Bitcoin to the designated wallet.

11. Receive Funds

Once your collateral is received and verified, Ledn will disburse the loan amount to you, usually within 24 hours of applying. This could be in the form of fiat currency or stablecoins, depending on the type of disbursement you chose.

12. Repay Loan

Once you receive your Bitcoin loan, you need to adhere to the repayment terms, including the schedule, interest rates, and any fees. We suggest regularly monitoring your loan balance and the loan-to-value (LTV) ratio. Ensure timely repayments to avoid penalties.

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Why Borrow Against Your Bitcoin?

Asset Retention

By borrowing against your Bitcoin, you gain liquidity without selling, allowing you to benefit from potential future price appreciation. This means you can access fiat to pay for goods, services, and bills without losing your position in the crypto market.

Speed

Bitcoin-backed loans offer rapid processing, often with instant approvals and funding within 24 hours. This is far faster than traditional loans that can take weeks to be approved and distributed.

No Credit Checks

These loans don’t require credit checks, making them accessible to those with low credit scores or limited credit history. Instead, approval is based on your Bitcoin collateral. This means even if you’re underbanked, or struggle with having banks accept or understand your wealth-status, you can still access a Bitcoin loan.

Competitive Rates

Because crypto collateral lowers lender risk, Bitcoin loans often have lower interest rates than unsecured loans like credit cards or payday loans, leading to potential cost savings.

Global Access

Bitcoin-backed loans bypass regional banking restrictions. With just an internet connection, borrowers in underbanked areas can access funding. However, keep in mind that crypto-backed loans may not be available in all regions.

Privacy

Unlike traditional loans that demand extensive personal and financial details, Bitcoin-backed loans focus on collateral, requiring minimal personal information - ideal for those who value discretion. Still, if you are a Bitcoin-backed borrower, you’ll typically have to pass KYC identity checks and meet specific eligibility requirements.

Related Content: Security Measures for Bitcoin Loans

Tax efficient

Using Bitcoin as collateral typically doesn’t trigger capital gains taxes. In some jurisdictions, interest payments may also be tax-deductible, but consult a professional tax advisor before borrowing for tax benefits.

Read more: How to Borrow Against Crypto - Decoding Crypto Loans 

Who are Bitcoin-backed loans best suited for?

While there’s no such thing as a typical Bitcoin-backed loan user, there're several major reasons why somebody would seek one out.

People who Value Privacy

Bitcoin-backed loans are a less invasive process than their traditional counterparts. Fiat loans often involve credit checks – where an external organization weighs up your financial history and scores it accordingly. These are used as a sign of trust, but in many circumstances, they’re an inaccurate representation of somebody.

Bitcoin loans offer an alternative to this, where credit checks are non-existent. Instead, over-collateralized loans act as the trust and security layer, meaning people can avoid having their history analysed and judged by a third party.

Bitcoin Maximalists

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If you’re a Bitcoin maximalist, then you’re likely to hold a significant portion of BTC, and are confident it’ll stay relevant in the financial world for the foreseeable future. These are people who see Bitcoin’s value beyond its economic worth, and understand how revolutionary it is. If this is the case for you, then it could make more sense to collateralize your BTC to receive fiat, rather than sell it and lose your position in the market.

Individuals that are Underbanked or lack Credit History

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Not everybody has the luxury of choosing between a Bitcoin or fiat loan. Many people around the world struggle to get recognised by financial institutions because they either don’t have the right documentation for a bank account, or don’t have the right tools to regularly access their accounts.

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For these people, obtaining a traditional loan is near-impossible, as banks simply don’t trust them. This is where Bitcoin-backed loans come to the rescue, as institutions like Ledn never look at financial history or standing, meaning the barrier of entry is much lower.

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5 Things You Should Know Before Applying For a Bitcoin-backed Loan

There are a few key terms to understand before you take out a Bitcoin-backed loan.

Annual Percentage Rate (APR)

The APR reflects your loan’s total cost, including interest and fees. A lower interest rate doesn’t always mean a cheaper loan. Check the APR to compare options accurately. Most providers require monthly interest payments.

Loan Duration

Shorter loan terms often have lower interest rates but require higher monthly payments. Longer terms reduce monthly costs but may come with higher overall interest.

Collateral

Your Bitcoin collateral determines loan terms. Offering more can secure better rates. However, consider market volatility and the risk of additional collateral requirements. Bitcoin-backed loans carry risks, including potential liquidation of loan collateral if the asset value falls significantly. 

Read more: Crypto Loan Without Collateral - The Complete Guide

Fees

Lending platforms charge various fees, including origination, transaction, and early repayment penalties. Plan for this ahead so you’re aware of how much you’re spending.

Loan-to-Value (LTV) Ratio

LTV measures your loan amount against your collateral’s value. Higher LTVs lead to higher interest rates, while lower LTVs offer better terms but require more Bitcoin as collateral.

Alternatives to Borrowing Against Your Bitcoin

Bitcoin loans aren’t the only way to access liquidity without selling your holdings. Depending on your financial goals, risk tolerance, and liquidity needs, other strategies may be more suitable.

Selling 

If immediate liquidity is your priority and you don’t want to worry about loan interest or collateral management, selling a portion of your Bitcoin holdings may be a simpler approach. However, this comes with potential capital gains taxes and forfeits future appreciation if Bitcoin’s price increases. Naturally, this often feels unsuitable for Bitcoin maximalists and those who believe in BTCs future (both in the short-term and long-run).

Using Stablecoins for Yield

Rather than borrowing, you could convert a portion of your Bitcoin into stablecoins and stake them on platforms offering yield-earning opportunities. This allows you to generate passive income without taking on loan obligations.

Traditional Loans and Credit Options

For those with strong credit scores, traditional personal loans or home equity lines of credit (HELOCs) may offer competitive interest rates without the risk of Bitcoin price fluctuations affecting loan terms.  

Peer-to-Peer Lending

Instead of using a centralized lender, you could explore peer-to-peer (P2P) lending platforms where you can negotiate loan terms directly with a lender. This can sometimes offer more flexible repayment structures.

Why Use Ledn To Borrow Against Your Bitcoin?

Let’s take a look at the top reasons why people choose Ledn.

Never paused client withdrawals: Ledn users have historically always been able to withdraw their assets – a sign of trustworthiness and credibility.

Transparent about financial activity: Ledn publishes its Proof of Reserves and Open-Book Reports, meaning you can see its financial health.

No hidden fees: zero hidden fees makes planning straightforward and predictable.

Leading investors: Ledn is backed by several investors, such as Coinbase, White Star, 10T Holdings, and Kingsway.

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Ready to get started Borrowing Against Your Bitcoin?

Bitcoin loans offer quick approvals, no credit checks, competitive interest rates, global access, privacy, and asset retention.  

Interested? Apply here.

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Disclaimer

This article is sponsored by 21 Technologies Inc. and/or its subsidiaries (“Ledn”) and is for general information, discussion, or educational purposes only and is not to be construed or relied upon as constituting legal, financial, investment, accounting, tax, estate-planning, or other professional advice or recommendation. Please read Ledn’s full Risk Disclosure Statement and Disclaimers.

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