Credello: Should you use a personal loan to buy crypto?

NEW YORK – March 7, 2022 – (Newswire.com)

Cryptocurrency has been in the news a lot lately and there is no shortage of advertisements encouraging people to invest in it. Some people are getting into the crypto market, while others are pouring big money into it.

With all this hype, you might consider investing in crypto. And you can even consider getting a personal loan for this purpose.

Before we do, however, let’s take some time to talk about what crypto is and whether it makes sense to get a personal loan so you can buy it.

What is Cryptocurrency?

Before you start looking secured loan vs unsecured loan options for buying cryptocurrency, you need to know exactly what it is. A cryptocurrency is a digital currency that can be used as a medium of exchange. Some people like it because it is a currency that is not tied to any government or central authority.

This puts it in stark contrast to currencies that governments or banks hold or maintain. Cryptocurrency is also attractive because it is nearly impossible to counterfeit. However, because it is deregulated, it is also extremely volatile. Crypto, just like stocks, can go up or down dramatically in a short period of time.

Can you use a personal loan to buy crypto?

The short answer as to whether you can use a personal loan to buy crypto is yes, you can. However, just because you can doesn’t mean you have to.

You can use personal loans for all sorts of things. You can use the money from a personal loan to pay for a wedding, funeral, renovations, etc. In many cases, you don’t need to tell the lender how you will use the money. In this regard, a personal loan is different from a business loan, where a lending entity will likely want you to submit a business plan.

If you have a good credit rating, getting a personal loan is not that difficult. If your credit score indicates that you are likely to repay this loan, you will likely have several lenders willing to offer you one.

If you wish, you can then use this money to buy crypto. However, there are sometimes exceptions to the use of borrowed funds. You will therefore need to read the fine print of the loan before committing to it if you intend to use it to buy crypto.

Buying crypto carries inherent risk

If you are able to get a personal loan, you may be able to use it to buy crypto, but you need to understand the inherent risk that comes with it.

Using a personal loan to buy crypto is like using it to buy a stock that you think will rise in price soon. You might be able to buy it low and then resell it when it hits a certain price, but it’s just as possible that you could lose a lot of money on the trade.

If this happens, you’ll likely have trouble repaying the loan, and you’ll also have to worry about accumulating interest. If you fail to repay the loan, you can seriously hurt your credit score.

Be careful when buying crypto

Most financial experts would advise you to be careful when trading or investing in crypto due to its volatility. They will also likely tell you to avoid taking out a personal loan for this purpose.

If you have a solid credit score, you can use it to get a loan and buy crypto, unless the fine print says you can’t. If you do that, however, you’re essentially playing.

If you want to invest in crypto, you should think of your holdings as a small part of a more diversified portfolio. It’s a much safer approach than taking out a personal loan and investing it all in cryptocurrency.

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Credello: Should you use a personal loan to buy crypto?

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