Bitcoin Loans: How to Borrow Against Your BTC Without Selling It
Selling Bitcoin to cover a short-term need has always felt wrong. You pay capital gains tax, you lose your position, and if the price goes up the week after you sell, you'll know about it.
Bitcoin loans exist for exactly this situation. You deposit your BTC as collateral, borrow cash or a stablecoin against it, and get your Bitcoin back when you repay.
Here's how it actually works.
What is a bitcoin loan?
A bitcoin loan lets you borrow money using BTC as collateral, without selling it.
The basic flow:
- Deposit Bitcoin with a lending platform
- Receive a loan in cash (USD, GBP) or a stablecoin (USDC, USDT)
- Repay the loan plus interest
- Your BTC is returned
If you don't repay, or if the BTC price drops too far, the platform liquidates your collateral to cover the loan. That's called a margin call, and it's the main risk to understand before you start.
How much can you borrow?
Most platforms offer a loan-to-value (LTV) ratio between 40% and 70%.
That means if you deposit £10,000 worth of BTC, you can borrow £4,000 to £7,000. The lower your LTV, the safer your position — there's more buffer before a price drop triggers liquidation.
Ledn offers 50% LTV at 11.9% APR. Nexo goes up to 50% LTV starting from 2.9% (if you hold their token) to 18.9% without it. Aave, the DeFi option, sits around 0.5% APR but requires more technical knowledge to use.
CeFi vs DeFi bitcoin loans
Centralised (CeFi) platforms like Ledn, Nexo, and Coinbase handle everything for you. You deposit BTC, they manage the loan. It's simple, but your BTC is held by them.
Decentralised (DeFi) protocols run on smart contracts. No company holds your collateral — the code does. Lower rates, but more complexity.
Ducat sits in a third category: Bitcoin-native DeFi. You deposit BTC, keep full custody in a vault, and choose what you receive — UNIT (a Bitcoin-native stablecoin) or USDC directly to your wallet. No wrapped BTC, no middleman.
What are bitcoin loan rates in 2026?
Current rates across the main platforms:
| Platform | APR | LTV | Collateral held by |
|---|---|---|---|
| Ledn | 11.9% | 50% | Platform (not lent out) |
| Nexo | 2.9–18.9% | 50% | Platform (not lent out) |
| Coinbase (via Morpho) | Variable | Up to 40% | Smart contract |
| Aave | ~0.5% | Variable | Smart contract |
| YouHodler | Up to 27% | Up to 90% | Platform (lent out) |
Higher LTV means more borrowing power but more liquidation risk. Platforms that lend your collateral out may offer cheaper rates but introduce counterparty risk — if something goes wrong on their end, your BTC could be at risk.
The tax angle
Borrowing against BTC is not a taxable event in most jurisdictions. Selling is.
That's a big part of why bitcoin loans have grown. Long-term holders can access liquidity without triggering capital gains tax. Always check with a tax adviser for your specific situation, but for most holders in the UK and US, the distinction holds.
What to watch out for
Liquidation. If BTC drops sharply and your LTV exceeds the platform's limit, they'll sell your collateral to cover the loan. Know your liquidation price before you borrow.
Collateral rehypothecation. Some platforms lend your BTC to other borrowers to generate yield. That's an extra layer of risk. Ledn, Nexo, and Ducat do not do this.
Custody risk. With CeFi platforms, you're trusting a company with your BTC. Celsius showed in 2022 what happens when that trust breaks down. Non-custodial options eliminate this risk.
Bitcoin loans on Bitcoin L1
Most DeFi lending still runs on Ethereum or Ethereum-compatible chains. That means your BTC gets wrapped (wBTC, cbBTC) before it can be used as collateral.
Wrapping adds bridge risk. If the bridge is exploited, your wrapped BTC could be worthless even if real BTC is fine.
Ducat eliminates this. Vaults run natively on Bitcoin L1, so your BTC never leaves the Bitcoin network. You can borrow UNIT, a Bitcoin-native stablecoin, or receive USDC directly — whichever suits you.
It's the most direct way to borrow against BTC that exists.
Open a vault and borrow against your BTC →
Rates referenced are from March 2026. Check each platform directly for current terms.
