Initiated in 2016 by enterprising Bitcoin enthusiasts, SALT was founded to extend the flexibility of crypto-backed lending to investors retaining digital possessions. This piece elucidates its operational mechanics.

The acronym for Secured Automated Lending Technology, SALT Lending stands out as a platform allowing members to secure loans through the collateralization of cryptocurrencies.

SALT Lending extends loans to both personal and corporate clientele when they offer cryptocurrency as collateral.

Business and personal loans are provided by SALT Lending.

These loans empower borrowers to retain their digital assets’ ownership while simultaneously accessing cash, thanks to the loan structure.

If there’s a downturn in cryptocurrency prices, a threshold breach of loan-to-value (LTV) could occur, prompting a “collateral maintenance call,” similar to a margin call scenario.

Interest rates fluctuate between 8.95% and 14.45%, contingent upon the selected term and LTV, with loan durations spanning 12, 36, or 60 months.

Crypto-assets serve as collateral for both personal and business loans, facilitated by SALT Lending, where smart contracts dictate, uphold, and perform agreement terms. Borrowers receive loan proceeds directly into their bank accounts, with their collateralized digital assets remaining their property, signifying any asset price changes belong to the borrower.

During the loan’s tenure, borrowers are obligated to make timely, repeated payments to the lender. Once the loan is concluded, known as loan completion, borrowers can withdraw their collateralized assets.

How a Loan-to-Value (LTV) Ratio Is Calculated

By dividing the loan principal amount by the U.S. dollar equivalent of the digital currency in the SALT wallet, the loan-to-value (LTV) ratio is determined. The ratio originates from the initial loan agreement terms.

Consider a $100,000 loan secured by Bitcoins worth $155,000, where the initial LTV ratio equates to 65% (100,000 ÷ 155,000 = 0.65). Essentially, the loan sum signifies 65% of the Bitcoin assets’ collateral value.

During the loan’s lifespan, as borrowers repay the loan, the initial LTV ratio diminishes. Nonetheless, if Bitcoin’s worth plummets significantly, the loan-to-value ratio would inflate. For instance, should the collateral’s value tumble to $110,000 due to a Bitcoin dip, the loan-to-value ratio would augment to approximately 91%.

Borrowers must then supplement their collateral by depositing more cryptocurrency or making payments to decrease the outstanding loan balance. A smart contract monitors the loan-to-value ratio, consistently updating it according to the collateral’s fluctuating worth and borrower repayments.

Important

Amidst the cryptocurrency industry’s volatility, SALT Lending experienced temporary deposit and withdrawal postponements in November 2022. Additionally, SALT’s lending license in California faced suspension.

Following a capital infusion of $64 million in February 2023, this Denver-based entity proclaimed undertaking a growth plan, poised for future success.

Contrary to typical bank loans, SALT loans bypass credit checks and scores for borrowers, relying instead on the liquidation potential of crypto assets if loans aren’t repaid—categorized as regulations. Eligibility granted, SALT progresses with loan applications.

Since cryptocurrency secures the loans as collateral, market price fluctuations influence its valuation over time.

If cryptocurrency value climbs, borrowers hold the choice to secure additional funds from lenders. Alternatively, they can utilize the increased digital asset value proceeds to ultimately repay the loan.

Conversely, a significant cryptocurrency dip could breach thresholds akin to a traditional brokerage margin call, where a broker demands more funds due to collateral value depreciation in margin stocks.

In the realm of crypto lending, security frailties in smart contracts and market volatility pose risks to both lenders and borrowers.

Allowing investors to access funds without selling their cryptocurrency, SALT blockchain-backed lending opens new financial vistas. For more details, continue exploring.

SALT Loan-to-Value (LTV) Ratio Triggers

Margin calls within SALT loans are instigated by specific loan-to-value ratios:

• 75% LTV: Initial margin call alert
• 83.3% LTV: Margin call obligating LTV reduction to 70% within 48 hours
• 90.91% LTV: Automatic stabilization incurs a 5% fee

Should collateral value plummet, propelling loan-to-value ratios to 90.91%, SALT automatically converts the crypto portfolio to a U.S. dollar base—a process known as automatic stabilization. Once LTV descends to 83.33% or less, borrowers can reinstate their market presence by reverting the stablecoin to the initial cryptocurrency.

The stabilization procedure aids in preserving the collateralized cryptocurrency assets’ value during downturns, permitting borrowers ample time to determine reentry into the crypto market.

Encompassing loan terms of 12, 36, or 60 months, SALT charges no origination fee for loan establishment. Borrowers are subjected to loan interest rates, as with standard loans, varying from 0.95% to 9.99% based on loan tenure and LTV. Moreover, stabilization incurs a 5% fee if initiated.

Collateralized deposits held don’t yield interest income.

A probable SALT borrower would envisage sustained or enhanced digital asset value. In crypto speak, such individuals are termed HODLers. Through SALT loans, they retain digital currency ownership, simultaneously harnessing cash on hand for diverse needs.

HODLer references a crypto sector term depicting individuals who intend to retain digital assets rather than engaging in short-term speculation. Originating from a misspelled version of “hold,” it has evolved into “hold on for dear life.”

Loan-to-value (LTV) delineates the loan’s magnitude relative to collateral’s security value. Assets with uncertain values, such as erratic cryptocurrencies, heighten risks of inadequate LTV, necessitating borrower intervention.