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Crypto Loan Interest Rates and Fees: What Borrowing Really Costs
The advertised interest rate is only part of what a crypto loan costs. Rates move, fees add up and liquidation penalties can dwarf the interest you pay. This guide shows how to compare the real cost.
How rates are set
DeFi lending pools usually set rates with an interest rate model based on utilization: the share of the pool that is borrowed. When demand for a stablecoin rises, utilization rises and so does the borrowing rate, sometimes sharply.
Centralized lenders set their own rates, often fixed for a term or tiered by LTV, loyalty programmes or loan size.
Fixed vs variable rates
| Fixed | Variable | |
|---|---|---|
| Predictability | High | Low |
| Typical where | Centralized lenders, some credit protocols | Most DeFi pools |
| Main risk | Paying more if market rates fall | Sudden rate spikes |
Costs beyond interest
- Origination fees for opening a loan.
- Withdrawal fees for collateral or loan proceeds.
- Network fees for every on-chain transaction.
- Liquidation penalties if your LTV gets too high.
- Conversion spreads when turning stablecoins into bank money.
How to compare loans
- Write down the rate and whether it is fixed or variable.
- Add all one-off fees and divide by how long you plan to borrow.
- Check how the rate behaved during past market stress.
- Compare the liquidation threshold, not just the rate.
Always note the date when you check rates; they change often. Back to the crypto loans hub.
Frequently asked questions
Because they depend on how much of each pool is borrowed. High demand pushes rates up automatically.
No. Fees, liquidation terms and the reliability of the platform matter as much as the rate.
Variable rates can change at any time. Fixed rates stay the same for the agreed term.
This page is for educational purposes only and is not financial, investment or tax advice. Crypto assets are volatile; you can lose all of your money.