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Using Crypto to Pay Off Your Students’ Loans

defi Learn

If you’re a part of the 65% of today’s graduates who finish college with student debt, you must be looking for ways to pay it off as quickly and conveniently as possible. With nearly one-third of students who have no other option but to go into debt to attend and finish college, you’re certainly not alone. And paying off your student loans using cryptocurrencies is one of the options worth considering.

So, if you hold any crypto assets and are considering using them to pay off your student debt, you’re in luck. Thanks to decentralized finance (DeFi) loans, you can repay your debt and save your crypto assets. Keep reading to learn how it all works.

What is a DeFi Loan?

DeFi refers to a decentralized ecosystem in which holders of crypto assets can lend them to others and earn interest. They’re based on smart contracts and are far less complicated than the typical financial bank operations.

So, a DeFi lending implies that the holder of crypto assets borrows their assets to another person without meeting each other or checking each other’s financial situation. Although it’s convenient and quick, DeFi loans come with certain risks for students paying off their debts. We’ll discuss it below.

What is the Process of Getting a DeFi Loan?

The process of getting a DeFi loan is quite simple:

  • The borrower chooses a DeFi app or platform.
  • They deposit collateral at least as high as the loan they want to get.
  • They sign a digital contract that sets the rules for both parties.

After receiving the funds, you can use them to pay off the debt. Then, once you return this loan, your collateral will be refunded, and you won’t lose any of your crypto assets.

Naturally, there are some other angles to consider.

What are the Advantages of a DeFi Loan?

Let’s first take a look at the bright side of DeFi loans. What makes it so unique? Is it worth taking another loan to pay off a previous one?

DeFi loans are so popular and widely used thanks to the following features:

  • They’re anonymous.
  • You don’t need a good credit score to take one.
  • They run on cloud services and are enabled digitally, which means they are processed super-fast. You can get a loan and pay off your debt every day.
  • They offer low-interest rates. The lender still earns money, but the borrower spends less than if they’d taken a loan from a bank.
  • The payment dynamics are flexible, and you don’t have fixed monthly deadlines to pay off your loan.

These conveniences are worth considering and are why more and more students decide to pay off their debt this way.

What are the Risks of a DeFi Loan?

Naturally, there are risks to taking a DeFi loan, and you need to be careful about it.

The collateral that the borrower deposited to get a loan can be liquidated. This happens if the currency you chose for your deposit starts losing value. Your collateral drops below the agreed value, and you lose it altogether.

You may feel like it’s a long shot for this to happen, but know that even the strongest cryptocurrencies fluctuate. For instance, Bitcoin’s daily fluctuations are around 3%. That means no cryptocurrency is excluded. 

What Other Options Do You Have?

Besides taking a DeFi loan, you have another option. You can use the crypto assets you have to pay off the debt. There are two ways for you to do it:

  • cash out your crypto assets and pay off the debt with the money you receive
  • pay off directly using crypto, if your student debt holder allows it

This is not a favored option for students, especially considering the downsides. Dominic Beaulieu, the financial manager at SupremeDissertations writing service, says:

Cashing out on your crypto is a taxable event. You’ll lose some money paying taxes, not to mention that you’re left without your assets. With a DeFi loan, you get your collateral back at the end, which I find an advantage.

Final Thoughts

Your student’s debt is one of the significant concerns right after finishing college. Your goal is to get rid of it as soon as possible. Hopefully, this article showed you how to use crypto to pay it off in the way that suits your situation the most.

So, start making your personalized plan and get your assets moving.

Disclaimer: The views and opinions expressed in this article are solely the author’s and do not necessarily reflect the views of CoinQuora. No information in this article should be interpreted as investment advice. CoinQuora encourages all users to do their own research before investing in cryptocurrencies.

Nicole Garrison is a Blockchain expert and a blogger. When she's not researching crypto and the ever-changing market, She tries to bring crypto closer to everyone - from laypeople and beginners to experts.