**The following information is not financial or tax advice.**
Celsius is changing the game for cryptocurrency users with their recent announcement of 0% APR crypto loans for California customers. If you hold any of the 40 cryptocurrencies available, you can apply for a loan in USD or stablecoins.
In partnership with Celsius, we'll take a closer look at the details of this new type of loan. Plus, we'll explain how these loans work.
If you want to skip ahead and go right to it, check out Celsius here >>
What Is Celsius?
Before we dive into the details, here’s a quick introduction to Celsius. As one of the leading earning and borrowing platforms, Celsius sees itself providing more financial opportunities through cryptocurrency.
Celsius was founded in 2017 and introduced its crypto-backed loan product in 2018. The company received its Finance Lender license in California in August of 2021. Then the platform made the big announcement that it would be offering 0% crypto loans for California users. The recent announcement is a game-changer both for Celsius and California crypto owners.
Want to learn more about Celsius? Check out our full review.
Launch Of 0% APR Crypto Loans For California
As of August 2021, Celsius has begun to offer 0% APR crypto-backed loans for California residents. That’s right! If you live in California, you can currently borrow funds against your crypto assets with zero interest.
How Much Can You Borrow?
In order to borrow from Celsius, you’ll need to provide your cryptocurrency as collateral for the loan. You can take advantage of 0% APR when you borrow at a 25% loan-to-value (LTV) ratio. In other words, the value of your loan can't exceed more than 25% of the value of the cryptocurrency you put up as collateral.
Celsius provides loans issued in stablecoins (USDC, USDT, GUSD, TUSD, PAX, and MCDAI) starting at $500 and loans issued in fiat (USD) starting at $15,000.
What Cryptocurrencies Can Be Used As Collateral?
Celsius supports over 40 cryptocurrencies on its platform, many of which can be used as collateral to borrow funds. Collateral options can vary by jurisdiction. Also, not all coins are supported at every LTV level.
Popular coins supported as collateral with Celsius include: BTC, ETH, CEL, LINK, MATIC, UNI, LTC, ADA, DOT, XLM, AAVE, BCH, SNX, ZEC, USDC, DASH, MANA, EOS, OMG, BAT, PAXG, ZRX, COMP, USDT, BSV, KNC, ETC, UMA, TUSD, LPT, TGBP, MCDAI, THKD, GUSD, PAX, TAUD, BUSD, and XAUT.
Additionally, you are able to take out a loan in several different types of currencies. These include TUSD, GUSD, PAX, USDC, MCDAI, USDT, and USD.
How Fast Will You Receive The Funds?
Celsius makes it quick and easy to apply for a loan through its mobile app. It only takes a couple of minutes to complete your loan application. And eligible borrowers are typically approved within 24 hours.
Once approved, loans issued in stablecoins are sent directly to your Celsius account. Fiat loans, meanwhile, are sent via wire transfer to your bank account.
What’s The Catch?
It's rare to find such a great deal on a loan interest rate. After all, lenders want to earn money via interest payments. So you might expect that there would be a lot of "gotchas" with these 0% APR crypto loans for California.
Actually, you won't find many of the most common ones. For example, you won’t pay any origination fees or late fees. Plus you won’t have to undergo a credit check or prove your income to qualify for the loan.
But before you take out a loan with Celsius, it's important to understand how to keep your loan secured in the event of a margin call (if the value of your crypto collateral drops below your contracted LTV).
How To Handle A Margin Call On Your Celsius Crypto Loan
If a margin call is issued for your loan, you'll automatically be notified by Celsius and be provided with three options to avoid liquidation:
- 1You can resolve your margin call directly through the Celsius app by adding additional collateral (in the same coin) to keep your loan active.
- 2Close your loan through the Celsius app by completing your interest payments and principal payment in one of the supported stablecoins.
- 3Close your loan manually by contacting the Celsius loans team completing your principal payment in fiat.
What About Users Who Live Outside Of California?
Currently, Celsius is only offering 0% APR crypto loans for California. But users living in other states can still take advantage of the lowest crypto-backed loan rates in the industry starting at just 1% APR.
Interest rates vary based on how much collateral you want to provide. But keep in mind that you can get up to a 25% discount on your monthly interest payments by completing payments in Celsius’s native CEL token.
Why Would You Want A Crypto Loan?
Celsius is making waves with its announcement of 0% APR crypto loans for California residents. However the question must be asked - why would a cryptocurrency holder want to take out a crypto-backed loan?
Firstly, it allows you to continue HODLing rather than having to liquidate your crypto investments to tap into their value. Secondly, you'll be able to avoid the capital gains tax that occurs when you sell crypto at a profit.
All in all, crypto-backed loans provide a flexible way for cryptocurrency holders to use the value of their funds without selling their digital assets.
How Do 0% APR Crypto Loans Work With Celsius?
Want to take out a crypto-backed loan with Celsius? Here’s how to make that happen.
Firstly, you’ll need to create a Celsius account before moving forward. After that, you can choose which type of funds you want to borrow. Remember, you can choose from TUSD, GUSD, PAX, USDC, MCDAI, USDT, and USD.
Next, select the term length you're comfortable with. Finally, Celsius will review your information for approval. In order to access the 0% APR option, the loan amount must be less than 25% of the collateral amount. Check out this quick video tutorial:
Want to see how much you may be able to borrow? Check out this nifty calculator from Celsius.
With the launch of 0% APR crypto loans in California, Celsius is opening an entirely new pathway for crypto users to tap into the value of their funds. And even if you don't live in California, you can still enjoy the lowest loan rates in the industry starting at just 1% APR depending on your jurisdiction.
Ready to give Celsius a try? Sign up today.
Loans made or arranged pursuant to a California Finance Lenders Law license. Celsius is licensed by the California Department of Financial Protection and Innovation under the California Finance Lender Law License No. 60DBO-133776. Celsius loans will be originated by Celsius Lending LLC pursuant to this license.
The terms of each loan are as set out in the applicable loan agreement. So please read the loan agreement carefully before requesting a loan.
Celsius loans are ‘balloon’ loans, meaning interest payments are made on a monthly basis, and principal amount returned at the end of the loan term. Interest rates vary from 1% to 8.95% APR, depending on your choice of LTV (Loan to Value), with up to 25% discount on interest where you choose to pay interest in CEL tokens. Termination of your loan prior to the lapse of 6 months would incur the full interest payment for the first 6 months.
Celsius loans are not available in all jurisdictions. Check your Celsius mobile app to see what borrowing options may be available in your location.
Celsius does not provide any financial, tax, legal or other professional advice, and you should consult your own independent advisor before making any financial decision, and consider whether digital assets and the risks involved are appropriate for you in light of your financial condition and circumstances.
Robert Farrington is America’s Millennial Money Expert® and America’s Student Loan Debt Expert™, and the founder of The College Investor, a personal finance site dedicated to helping millennials escape student loan debt to start investing and building wealth for the future. You can learn more about him on the About Page, or on his personal site RobertFarrington.com.
He regularly writes about investing, student loan debt, and general personal finance topics geared towards anyone wanting to earn more, get out of debt, and start building wealth for the future.
He has been quoted in major publications including the New York Times, Washington Post, Fox, ABC, NBC, and more. He is also a regular contributor to Forbes.