Bitcoin-Backed Loans In 2025: A Helpful Guide For Borrowers

Bitcoin-backed loans have grown into a practical financial tool for individuals who want liquidity without selling their cryptocurrency. In 2025, US borrowers have access to a more mature and regulated lending market shaped by past crises, institutional interest, and improved transparency.

This article breaks down how Bitcoin-backed loans work, the leading providers, key risks, and what makes them different from traditional loans.

How Bitcoin-backed loans work

Bitcoin-backed loans enable borrowers to use their BTC as collateral to secure a cash or stablecoin loan. Typically, the lender requires overcollateralization — meaning the value of your Bitcoin must exceed the loan amount. A common loan-to-value (LTV) ratio is 50%, so a $10,000 loan would require $20,000 in Bitcoin as collateral.

Borrowers make interest payments during the loan term and repay the principal by the end. If the price of Bitcoin falls and the LTV increases past a certain threshold, borrowers must either add more collateral or repay part of the loan to avoid liquidation. If they fail to act, the lender can sell the Bitcoin to cover the loan. Once the loan is repaid in full, the remaining Bitcoin is returned.

Top Bitcoin loan providers in 2025

Ledn offers BTC-backed loans with up to 50% LTV and interest rates starting at 10.4% APR. The platform does rehypothecate collateral — meaning it lends your BTC to other institutions to generate yield — but provides transparency through monthly proof-of-reserve audits.

Unchained Capital takes a different approach with multi-signature custody and no rehypothecation. It uses a 2-of-3 key setup where the borrower retains a key, giving them more control over their collateral. Interest rates range from 12–16% APR, and loans are typically offered at 50% LTV.

Coinbase re-entered the lending space in 2025 through an integration with the Morpho DeFi protocol on its Base network. US users can borrow up to $100,000 in USDC by posting BTC collateral, with LTV ratios up to 40%. Loan terms are flexible, and liquidations are handled automatically via smart contracts.

Nexo offers open-ended credit lines with LTVs up to 50% and rates ranging from 2.9% to 18.9% depending on loyalty tier and collateral ratio. The platform claims not to rehypothecate user collateral and provides insurance coverage via third-party custodians.

Crypto.com also provides crypto-backed loans but discloses less detail about custody practices. Rates average around 12% APR, with higher rates and LTVs for users who stake its CRO token.

Loan terms, interest rates, and fees

Loan durations vary. Some providers offer fixed 12-month terms (e.g., Ledn), while others like Nexo offer open-ended loans. Borrowers often pay monthly interest and have the option to repay the principal early with no penalty.

Interest rates for Bitcoin-backed loans in 2025 generally range between 10% and 15% APR, though some services offer lower rates for low LTVs and loyalty perks. Coinbase’s Morpho integration offers dynamic DeFi rates that can fluctuate based on liquidity but may be as low as 2–5% in favorable conditions.

Fees include origination charges (0–2%), late payment fees, and potential liquidation penalties (e.g., unchained charges 2% of the liquidated amount). Borrowers should review APR calculations that include all applicable fees.

Collateral management and risk

Managing LTV is crucial. Most lenders alert borrowers if the collateral value drops and the LTV reaches a danger zone — usually 70–80%. If no action is taken, automatic liquidation occurs to preserve loan solvency.

Rehypothecation presents another risk. Platforms like Ledn lend your BTC to other institutions, which could introduce counterparty risk. Unchained and Coinbase avoid this risk by keeping funds in segregated custody or smart contracts.

Borrowers should also be aware of smart contract vulnerabilities (especially in DeFi models), market volatility, and tax implications. If collateral is liquidated, it may be treated as a taxable sale by the IRS.

Regulatory landscape in the US

Since 2022, the US Securities and Exchange Commission (SEC) has increased scrutiny of crypto lending. Platforms like BlockFi and Nexo settled with the SEC and ceased offering interest-bearing accounts. Today, the focus is on overcollateralized, non-yield lending products that are more in line with traditional secured loans.

State licensing is another factor. Platforms like Unchained Capital hold licenses in several states and comply with lending laws such as interest rate caps and disclosure requirements.

A major development was the recent repeal of SEC Staff Accounting Bulletin 121 (SAB 121), which had discouraged banks from offering crypto custody by inflating their balance sheet liabilities. Its repeal opened the door for banks to consider offering crypto-secured loans without prohibitive accounting burdens.

Bitcoin-backed loans use cases and trends

Bitcoin-backed loans serve a range of purposes:

• Liquidity without selling BTC: Borrowers can access cash without triggering capital gains taxes.
• Major expenses: Home down payments, car purchases, or tuition payments.
• Portfolio diversification: Investing in other assets without selling Bitcoin.
• Yield farming or trading: Borrowing stablecoins to earn DeFi yields or leverage positions.
• Doubling BTC exposure: Some services let users borrow against BTC to buy more BTC (e.g., Ledn’s B2X).

According to a report by HTF Market Intelligence, the US market is projected to grow from $8.6billion in 2024 to over $45bn by 2030, thanks to stronger platforms, better regulation, and rising institutional participation.

Comparison to traditional loans

Compared to mortgages or auto loans, Bitcoin-backed loans have:

• Shorter terms: Typically 12 months or open-ended.
• Higher interest rates: 10–15% vs. 4–7% for many secured traditional loans.
• No credit checks: Approval depends solely on collateral.
• Volatile collateral: Real estate or vehicles are more stable than Bitcoin.
• Fewer protections: No FDIC insurance; borrower risk is higher in platform failures.

Conclusion

Bitcoin-backed loans in 2025 offer a viable way for individuals to unlock liquidity without giving up their digital assets. With more responsible lenders, stronger regulation, and increasing mainstream adoption, these loans are becoming more accessible and trusted. However, borrowers must understand the risks — especially around liquidation and platform solvency — and choose their provider carefully.

When used wisely, Bitcoin-backed loans can be a powerful financial tool. But like all financial products, due diligence and risk management are essential.

1. 01.

   What are Bitcoin-backed loans?

   

   Bitcoin-backed loans let you use your Bitcoin as collateral to borrow cash or stablecoins without selling your BTC. The lender holds your Bitcoin during the loan term, and you repay the principal plus interest to get your BTC back.

2. 02.

   How much loan can I get on my Bitcoin holdings?

   

   Most platforms offer up to 40–50% of your Bitcoin’s value as a loan. For example, if your BTC is worth $10,000, you can typically borrow $4,000 to $5,000, depending on the provider and market conditions.