How Do Crypto-Backed Loans Work in Guarda

A crypto-backed loan is the way to access crypto without selling the assets you already hold. Guarda supports crypto-backed loans through CoinRabbit, our lending partner. Users provide crypto as collateral, receive a loan, and get their collateral back after repaying what they borrowed plus the accumulated interest.

There is no traditional credit check or lengthy approval process. The crypto itself secures the loan.

Guarda provides access to the loan feature through the wallet, while CoinRabbit provides the loan, manages the collateral, and sets the lending conditions. Guarda doesn't add its own lending APR on top. The APR, LTV, Price down limit (liquidation level), and other conditions are shown before the loan is confirmed.

What Is a Crypto-Backed Loan?

The easiest way to understand it is with an example.

Suppose a user has $1,000 worth of crypto. They need some money for other things but don't want to sell the asset. That's where a crypto-backed loan comes in. Users can put their crypto down as collateral and borrow against its value.

If the selected loan has a 50% LTV (loan-to-value), $1,000 worth of collateral allows them to borrow approximately $500 and use it however they want. The collateral stays with the lending provider while the loan is active. Once the user repays the $500 plus accumulated interest, the collateral is released. This way, the crypto isn't sold to get the liquidity. It has simply been put aside to secure the loan. Funds become available once the loan is repaid unless the position is liquidated.

CoinRabbit holds the collateral in cold storage while the loan is active. Users can't withdraw or spend that crypto because it is securing the money they borrowed. CoinRabbit also has a 100% no-rehypothecation policy, meaning the collateral isn't lent out or reused elsewhere while securing the loan. Once the loan and accumulated interest are repaid, the collateral is released and returned to the selected wallet address.