Getting Started with Crypto Borrowing

Why Borrow Against Your Bitcoin?

If you hold Bitcoin and need cash or stablecoins, selling is not your only option. Crypto borrowing lets you unlock the value of your Bitcoin without giving up ownership. You deposit your BTC as collateral, receive stablecoins like USDC, and get your Bitcoin back when you repay the loan.

This approach has become increasingly popular for several reasons:

• Keep your Bitcoin exposure. If you believe Bitcoin will appreciate over time, selling means missing out on future gains. Borrowing lets you access liquidity while staying invested.
• Potential tax advantages. In many jurisdictions, borrowing against an asset is not a taxable event, whereas selling is. Consult a tax professional for advice specific to your situation.
• Flexible repayment. DeFi loans have no fixed terms. You repay when you want, with no penalties for early repayment.
• No permission needed. Unlike bank loans, there is no application process, no credit check, and no waiting period.

Borrow by Sats Terminal is a lending aggregator that makes this process simple. It connects you to multiple lending protocols so you can compare rates and terms in one place, all without KYC or account creation.

What You Need Before You Start

Before diving into your first crypto loan, make sure you have these basics in order.

1. Collateral Assets

You need Bitcoin or a Bitcoin-derivative token to use as collateral. The most common options include:

• wBTC (Wrapped Bitcoin) -- an ERC-20 token on Ethereum that represents Bitcoin 1:1.
• cbBTC (Coinbase Wrapped Bitcoin) -- another wrapped Bitcoin variant available on multiple chains.
• BTC on supported networks -- depending on the protocol, native Bitcoin may be supported through various bridging mechanisms.

If you currently hold Bitcoin on an exchange, you will need to withdraw it to a wallet you control (or convert it to a wrapped version that works with DeFi protocols).

2. Gas Fees

Every transaction on a blockchain requires a small fee called a "gas fee." You will need a small amount of the native token for the network you are using -- ETH for Ethereum, or the equivalent for Layer 2 networks. These fees are usually small (a few cents to a few dollars on Layer 2s, or more on Ethereum mainnet during busy periods).

3. A Web Browser

Borrow by Sats Terminal is a web application at borrow.satsterminal.com. You can access it from any modern browser on desktop or mobile. No software installation required.

Step 1: Connect Your Wallet

The first thing you will do on Borrow by Sats Terminal is connect a wallet. This is how you interact with DeFi protocols -- your wallet is your identity and your bank account rolled into one.

Using the Built-In Privy Wallet

Borrow by Sats Terminal uses Privy to provide a seamless wallet experience. Privy lets you create or connect a wallet using:

• Email address -- sign up with your email, and Privy creates a self-custodial wallet for you.
• Social login -- use Google, Twitter, or other social accounts.
• Existing wallet -- connect a wallet you already have, such as MetaMask or Coinbase Wallet.

The Privy wallet is self-custodial, meaning only you have access to your funds. Neither Sats Terminal nor Privy can access or move your assets.

What "Self-Custodial" Means for You

As a borrower, self-custody is a significant benefit. Your collateral is never held by a company -- it sits in a smart contract on the blockchain. You maintain full control and can see exactly where your assets are at all times. This eliminates the counterparty risk that exists when a centralized company holds your funds.

For a deeper dive into wallets, see our guide to crypto wallets.

Step 2: Choose Your Collateral and Loan Amount

Once your wallet is connected, you will see the Borrow interface. Here is where you specify what you want to do.

Selecting Your Collateral

Choose which Bitcoin asset you want to deposit as collateral. The platform supports multiple Bitcoin variants, and the interface clearly shows which assets are available.

Deciding How Much to Borrow

You will need to decide on a loan amount. This is where understanding the loan-to-value (LTV) ratio becomes important.

Example: If you deposit $10,000 worth of wBTC and want to borrow at a 50% LTV, you would borrow $5,000 in stablecoins.

A few guidelines for beginners:

• Stay below 50% LTV for your first loan. This gives you a comfortable safety margin against price drops.
• Remember that LTV changes as the price of your collateral moves. A 50% LTV today could become 60% or 70% tomorrow if Bitcoin drops.
• You can always borrow more later if your collateral value increases, or repay partially to reduce risk.

Choosing a Stablecoin

Borrow by Sats Terminal lets you borrow stablecoins like USDC and USDT. Both are pegged to the US dollar, but they differ slightly:

• USDC is issued by Circle and is widely considered one of the most transparent stablecoins.
• USDT is issued by Tether and has the largest market cap and trading volume.

Choose whichever works best for your intended use.

Step 3: Compare Protocols and Select Your Terms

This is where Borrow by Sats Terminal truly shines. Instead of visiting multiple lending protocol websites and comparing them manually, the platform does the work for you.

What You Will See

For your chosen collateral and loan amount, Borrow displays options from multiple DeFi protocols, including:

• Interest rate -- the ongoing cost of your loan, displayed as an annual percentage. See our guide on interest rates in crypto for more detail.
• Maximum LTV -- the highest LTV the protocol allows.
• Liquidation threshold -- the LTV at which your collateral starts being liquidated.
• Protocol name -- so you know exactly which smart contracts you are interacting with.

How to Choose

For your first loan, prioritize safety and simplicity:

1. Look for the lowest interest rate among protocols that meet your LTV needs.
2. Check the liquidation threshold -- a higher threshold means more room before liquidation, which is safer.
3. Consider the protocol's track record -- established protocols like Aave and Compound have years of battle-tested operation.

Borrow by Sats Terminal sorts and presents these options clearly so you can make an informed decision without being a DeFi expert.

Step 4: Review and Confirm Your Transaction

Before your loan is finalized, you will see a summary screen with all the details of your transaction.

What to Review

• Collateral amount -- how much Bitcoin you are depositing.
• Borrow amount -- how many stablecoins you are receiving.
• LTV ratio -- your starting loan-to-value ratio.
• Interest rate -- what you will pay for the loan annually.
• Liquidation threshold -- the danger zone you want to avoid.
• Network and gas estimate -- which blockchain and approximately how much the transaction will cost in gas fees.

Approving the Transaction

When you click to confirm, your wallet will ask you to sign one or more transactions:

1. Approval transaction -- this gives the lending protocol permission to use your collateral token. This is a one-time step per token.
2. Deposit and borrow transaction -- this deposits your collateral and issues the loan in a single transaction (on some protocols these may be separate).

Sign these transactions in your wallet, and within a few moments (depending on network congestion), your stablecoins will appear in your wallet.

Congratulations -- you have just taken out your first crypto loan.

Step 5: Monitor and Manage Your Position

Taking out the loan is just the beginning. Managing your position over time is equally important.

Tracking Your LTV

Your LTV ratio changes whenever the price of Bitcoin moves. On Borrow by Sats Terminal, you can see your active positions and their current health status. Keep an eye on:

• Current LTV vs. liquidation threshold -- how much breathing room do you have?
• Bitcoin price trends -- are prices trending up (safer) or down (riskier)?
• Interest accrual -- your loan balance grows over time as interest accrues.

Setting Up Alerts

Consider setting price alerts for Bitcoin using any price tracking app or website. A simple rule of thumb: calculate the Bitcoin price at which your LTV would reach the liquidation threshold, and set an alert well above that level so you have time to act.

Adding Collateral

If the market dips and your LTV increases, you can add more collateral to your position. This deposits additional Bitcoin into the smart contract, lowering your LTV and moving you further from liquidation.

Partial Repayment

You can repay part of your loan at any time to reduce your outstanding balance and lower your LTV. There are no penalties for partial repayment in DeFi lending.

Step 6: Repaying Your Loan

When you are ready to close your position -- whether that is days, weeks, or months later -- you repay the loan and reclaim your Bitcoin.

How Repayment Works

1. Ensure you have enough stablecoins to cover your loan balance plus any accrued interest.
2. Navigate to your active position on Borrow by Sats Terminal.
3. Click repay and specify the amount (full or partial).
4. Sign the transaction in your wallet.
5. Receive your collateral back -- your Bitcoin is released from the smart contract and returned to your wallet.

What About Interest?

Interest accrues continuously on your loan. The total repayment amount will be your original borrow amount plus the accumulated interest. For example, if you borrowed $5,000 at a 5% annual rate and held the loan for three months, you would owe approximately $5,062.50.

The beauty of DeFi loans is their flexibility. There is no minimum loan duration, no prepayment penalty, and no fixed payment schedule. You are in complete control.

Common Mistakes to Avoid

Learning from others' mistakes can save you time, money, and stress. Here are the most common pitfalls new crypto borrowers encounter.

Borrowing at Maximum LTV

Just because a protocol allows 75% or 80% LTV does not mean you should borrow that much. Maximum LTV leaves almost no room for price drops. A 10% decline in Bitcoin price could push you into liquidation. Start at 40-50% LTV and adjust as you gain experience.

Ignoring Gas Fees

On Ethereum mainnet, gas fees can be significant -- sometimes $50 or more per transaction during peak times. Factor these costs into your borrowing plan. If you are borrowing a small amount, high gas fees could eat into the value of your loan. Consider using Layer 2 networks for lower fees.

Forgetting About Interest

Interest accrues continuously. If you borrow and forget about your position for months, the accumulated interest increases your effective LTV. Set reminders to check on your position regularly.

Not Having a Liquidation Plan

Before you borrow, decide what you will do if Bitcoin drops 20%, 30%, or 40%. Having a plan prevents panic decisions. Will you add more collateral? Repay part of the loan? Accept partial liquidation? Decide in advance.

Using Borrowed Funds for High-Risk Activities

Borrowing stablecoins to buy more crypto (leverage) amplifies both gains and losses. If you are just getting started, use borrowed funds for their intended purpose and avoid compounding risk.

How Borrow by Sats Terminal Makes It Easier

The DeFi lending space can be intimidating for newcomers. Borrow by Sats Terminal was built to lower the barrier to entry.

One Interface, Multiple Protocols

Instead of learning how to use Aave, Compound, Morpho, and other protocols individually, you access them all through a single, clean interface. This saves time and reduces the chance of making mistakes on unfamiliar platforms.

No KYC, No Hassle

There is no lengthy sign-up process. No document uploads. No waiting for approval. Connect your wallet and start borrowing in minutes.

Transparent Comparison

All the information you need -- rates, LTV limits, liquidation thresholds -- is displayed side by side. You can make informed decisions without switching between multiple tabs and protocols.

Self-Custodial Security

Your assets are never held by Sats Terminal. Everything flows through audited smart contracts on the blockchain. You can verify every transaction and track your collateral at any time.

For answers to more specific questions, visit our FAQ on how to get started with Sats Terminal Borrow.

Ready to Start?

Crypto borrowing might seem complex at first, but the core concept is simple: deposit Bitcoin, receive stablecoins, repay when ready. With Borrow by Sats Terminal, the process is streamlined into a few clicks.

Start with a small amount, keep your LTV conservative, and monitor your position. As you gain confidence, you can explore more advanced strategies and optimize your borrowing across different protocols.

Your Bitcoin does not have to sit idle. Put it to work while keeping full ownership.