How to Borrow Against Bitcoin: A Practical Guide
Borrowing against Bitcoin means pledging BTC as collateral and receiving cash or a stablecoin that you must later repay. You keep exposure to Bitcoin's price, but the pledged coins are restricted and can be sold under the loan's liquidation rules. The loan also creates a repayment obligation; it is not a way to unlock free cash.
This guide gives you a process for comparing offers. Product pages and primary sources were checked on 11 October 2026. Terms and eligibility can change, so the actual quote and agreement control.
How a BTC-backed loan works
- Choose the proceeds you need. Decide whether you need bank money, USDC, or another stablecoin. A conversion from one asset to another can add cost and risk.
- Choose a collateral model. A custodial lender holds BTC under its contract; a multisig or vault splits control under signing rules; an on-chain market may require a wrapped BTC token.
- Set a conservative loan size. LTV equals outstanding debt divided by the current value of BTC collateral. Lower starting LTV gives more room for price falls, but the threshold and liquidation process vary by provider.
- Read the full quote. Record net proceeds, interest or one-time charges, other fees, repayment deadline, and the BTC price at which your position is warned or liquidated.
- Post collateral and monitor it. Repay or add collateral if permitted before the position reaches its liquidation level. Have a repayment source that does not depend on a higher BTC price.
- Repay and withdraw. Confirm how long redemption takes, who signs the release, and what happens if the normal interface is unavailable.
Pick the amount you can repay
Start from a defined cash need and a credible repayment source, then work backward to the BTC you can pledge. Borrowing the provider's maximum amount leaves less room for a market drop. If the only repayment plan is “BTC will be worth more later,” reduce the loan or compare a partial sale.
Ducat's borrow page describes its Bitcoin L1 vault flow. Ducat remains in mainnet closed alpha, so access is limited. Eligible users can receive UNIT or USDC. Confirm your eligibility, the live transaction preview, net proceeds, collateral requirement, and redemption rules in the app before signing.
Understand LTV before choosing a platform
A worked LTV stress test
Suppose you pledge $40,000 of BTC and receive a $20,000 loan. The starting LTV is 50%. If BTC loses 25% of its value, the collateral is worth $30,000 and your LTV becomes about 66.7%, even before added interest or fees. If BTC loses 37.5%, the collateral is worth $25,000 and LTV reaches 80%. That matters because Ledn and Arch each describe liquidation action at 80% for their BTC loan products, but their warning and sale processes differ. Other markets use other limits.
| BTC price fall | BTC collateral value | LTV on $20,000 of unchanged debt |
|---|---|---|
| 0% | $40,000 | 50% |
| 20% | $32,000 | 62.5% |
| 25% | $30,000 | 66.7% |
| 37.5% | $25,000 | 80% |
Loan limit versus liquidation limit
A provider's maximum initial LTV is not its liquidation LTV. Ask for both. Also ask whether debt grows with interest, whether liquidation is partial or full, whether penalties apply, and how quickly top-ups are recognized. Our BTC collateral guide explains the terms in more detail.
Compare live borrowing routes
| Route | What to verify in the live offer | Primary terms |
|---|---|---|
| Ledn | Size-tiered fixed APR, 12-month maturity, collateral re-posting terms | Ledn loans |
| Strike | Location- and product-specific APR, 50% initial LTV for standard loans including interest, 60-day closure limit | Strike loan rates |
| Arch | APR tier including origination fee, up to 60% starting BTC LTV | Arch rate card |
| Lava | Interest quote, capital charge, vault and liquidation rules | Lava charge FAQ |
| Coinbase | Variable rate and fees; BTC becomes cbBTC on Morpho/Base | Coinbase loan guide |
| Nexo | Product, loyalty tier, payout options, and collateral terms | Nexo BTC credit line |
| Aave | Exact market rate, BTC wrapper, smart-contract and liquidation parameters | Aave app |
| Hodl Hodl | Lender-negotiated terms, 1.5% origination fee, crypto-only proceeds | Hodl Hodl lending |
| Unchained | Collaborative custody, minimum size, borrower eligibility | Unchained loans |
| Ducat | One-time 7% charge, actual net proceeds, vault and redemption rules | Borrow against BTC |
Use our rate comparison for a dated pricing snapshot and nine-route collateral comparison for the custody details. An older article's rate is not a substitute for a quote.
What does the loan really cost?
Compare the same net proceeds
Compare the same net proceeds over the same expected holding period. Add interest, origination or minting charges, conversion costs, network fees, and any charge to close or liquidate. An APR and a one-time charge are different units; you cannot compare them without a duration.
As an illustration, 10% simple annual interest on a hypothetical $10,000 loan is about $500 for six months or $1,000 for a year, before other charges. Ducat's 7% one-time fee is $700 if the fee base is $10,000. The shorter example favours the APR; the longer example favours the one-time charge. The real result depends on the actual fee base, timing, interest method, proceeds, and repayment rules. Check each transaction preview rather than applying this example to an offer.
Borrowing stablecoins and then depositing them for yield adds another investment with loss, liquidity, token, and protocol risk. A displayed APY can change and is not a guaranteed way to cover a borrowing charge. Calculate the combined cash flows and worst-case repayment before using borrowed proceeds that way.
Stablecoins are part of the risk
If your loan pays out in USDC or UNIT, check the network, issuer, redemption path, and conversion cost before treating the balance like bank dollars. If your expenses are in fiat, include exchange and withdrawal steps in both the price and timing calculation. A stablecoin's target price is not a promise of redemption under every market condition.
Custody and collateral rights
Ledn says Custodied Loan collateral may be re-posted to an institutional USD funding partner or financing vehicle but cannot be lent onward to generate yield. Arch says collateral is held by Anchorage Digital and not rehypothecated. These are provider claims backed by agreements that should be read, not blanket guarantees against business failure.
Coinbase says BTC is converted to cbBTC and pledged on Morpho on Base. That adds wrapper and smart-contract dependencies. Aave BTC markets likewise require BTC-linked tokens. A Bitcoin L1 vault avoids that particular conversion, but still has signing, oracle, liquidation, and recovery risks. Our non-custodial loan guide covers the questions to ask.
Borrowing versus selling
A sale ends exposure to the BTC sold and leaves no loan to repay. A loan preserves exposure while adding fees, monitoring, and the possibility of collateral sale. Tax treatment of either path depends on where you live and how the transaction is structured; do not assume borrowing or liquidation is automatically tax-free. Keep records and ask a qualified local adviser about your situation.
A loan is most defensible when you have a specific cash need, can repay from another source, and can tolerate a severe BTC decline without relying on an emergency top-up you may not be able to make.
When borrowing may be a poor fit
Be cautious if the loan would finance ongoing living costs without a repayment source, if a margin call would force you to sell other essential assets, or if the minimum loan is far larger than the amount you need. In those cases, a smaller partial BTC sale or another funding source may leave you with fewer obligations.
Questions to answer before depositing BTC
- How much money arrives after all charges and conversions?
- What will you owe if you close in three, six, or twelve months?
- What exact BTC price triggers warnings, liquidation, and any penalty?
- Who can move the collateral, and how can you recover it if the interface fails?
- Can you repay early, and what happens at maturity?
- Are you eligible for this product in your location?
Frequently asked questions
Can I borrow without selling Bitcoin? Yes, that is the purpose of a BTC-backed loan, but BTC becomes restricted collateral and can still be sold on liquidation.
Can I borrow USDC? Several providers offer USDC where eligible. Ledn, Arch, and Coinbase describe USDC routes. Ducat also offers USDC or UNIT payout to eligible closed-alpha users; check your live quote and conversion costs in the app.
Is a Bitcoin loan automatically cheaper than selling? No. Interest, one-time fees, conversion costs, possible liquidation, and tax treatment can change the result. Compare the actual cash flows for your circumstances.
If Ducat's Bitcoin L1 model fits those answers, review the current borrowing flow and verify its offer in the app.
Provider pages checked on 11 October 2026. Ducat's 7% charge was confirmed for this update on that date. General information only, not financial or tax advice.
