Figure Lending LLC offers a service that allows individuals to borrow cash by using their cryptocurrency holdings as collateral. This product aims to provide borrowers with liquidity without the need to sell their digital assets, thereby potentially avoiding taxable events and preserving future upside.
Understanding Crypto-Backed Loans
The core concept behind Figure’s crypto-backed loan service is to present an alternative to selling cryptocurrencies such as Bitcoin, Ethereum, or Solana. By leveraging these assets as collateral, users can obtain cash loans. According to Figure Lending LLC, this approach enables borrowers to maintain ownership of their crypto while accessing funds, a feature particularly beneficial for long-term holders.
Key Features and Terms
Key features of Figure’s crypto-backed loans include fixed interest rates for the duration of the loan, same-day funding, and no requirement for a credit score. Loan approval is contingent on the value of the collateral. The loans offer a maximum loan-to-value (LTV) ratio of up to 75%, meaning borrowers can potentially borrow up to 75% of the value of their pledged cryptocurrency.
Figure Lending LLC is a licensed lender, holding NMLS ID #1717824. The company states that its crypto-backed loans carry a fixed rate for the life of the loan, ensuring consistent monthly payments regardless of market fluctuations. The maximum Annual Percentage Rate (APR) for these loans is reported as 12.62%, which includes a 1% origination fee. Specifically, interest rates are cited as 8.91% (9.999% APR) at a 50% LTV, and 11.50% (12.62% APR) for LTVs up to 75%. The repayment period for these loans is 12 months.
A representative example provided by Figure illustrates a $10,000 loan at a 50% LTV, with an 8.91% interest rate and a 1% origination fee. This scenario results in 12 monthly payments of $74.25, with the origination fee amounting to $100.
Liquidation Protection and Risks
Figure also offers optional Liquidation Protection in select states. This protection is designed to safeguard against margin calls and liquidations specifically due to price declines. It is important to note that this protection applies only to price volatility and does not cover missed payments or defaults. Liquidation protection is available in states including California, New York, Florida, Pennsylvania, Alabama, Alaska, Georgia, Hawaii, Massachusetts, and Utah.
While borrowing against crypto is generally considered non-taxable, the company emphasizes that liquidation triggers a taxable sale. This information is not tax advice, and individuals are advised to consult with a professional regarding their specific tax situation.
Regulatory and Availability Details
Figure Lending LLC is not authorized by the New York State Department of Financial Services for mortgage solicitation. Crypto loans are offered to U.S. borrowers by Figure Lending LLC but are not available to residents of Washington D.C., Idaho, Illinois, Kentucky, Maryland, Mississippi, South Dakota, Texas, Vermont, or Virginia. Figure Payments Corporation, which offers cryptocurrency services, has NMLS ID 2033432 but is not licensed with the SEC or CFTC, nor is it a Member of NFA. Crypto loans are also offered through Figure Markets Credit LLC to residents of New York and international customers, with a list of excluded jurisdictions.
Potential borrowers should be aware that system access and trade placement can be delayed or fail due to factors such as market volatility, quote delays, and system errors. The exact interest rate and terms may vary based on the application date and LTV ratio.
Why This Matters
The materials describe a narrow update: Figure Lending LLC provides a service where individuals can use cryptocurrencies like Bitcoin, Ethereum, or Solana as collateral to obtain cash loans. The exact interest rate will depend on the date of application and factors such as LTV ratio.
Broader Context
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