New York-based BlockFi was launched in 2017 by Zac Prince and Flori Marquez, two crypto-enthusiasts with a background in sales and business development as well as in portfolio management.
BlockFi has secured over $50 million in investment and lending capital from an array of crypto and tech investors, including ConsenSys Ventures, SoFi, and Mike Novogratz’s Galaxy Digital.
BlockFi offers crypto-backed loans and operates under Article 9 of the Uniform Commercial Code which governs secured lending, and it files UCC-1 financing statements with its borrowers’ states.
Blockfi works with Scratch, a 3rd party loan servicer, who manages it’s loan contracts and repayments.
Blockfi Loan Collateral
Blockfi lodges collateral with Gemini, a New York trust company licensed by the New York State Department of Financial Services. Gemini is owned by Cameron and Tyler Winklevoss, aka the Winklevii of Facebook fame. Gemini is a licensed digital asset exchange and custodian, and provides a wide range of crypto related services to private and institutional clients. Gemini is highly regarded in the crypto industry.
Blockfi’s collateral options are Bitcoin, Ethereum, Litecoin and GUSD (the Gemini created USD stable coin). BlockFi plan to start accepting Bitcoin Cash and XRP as collateral shortly, and additional top 10 crypto assets thereafter.
BlockFi Loan To Value (LTV) Rates.
BlockFi’s standard loan to value (LTV) rate is 35%. However you may be able to receive an LTV of up to 50% in return for paying a higher interest rate.
Based on BlockFi’s standard LTV rate of 35%, lodging $10,000 worth of collateral will result in a maximum loan of $3,500.
Read our beginners guide on loan to value (LTV) rates.
BlockFi Collateral Price Appreciation
Any appreciation in the value of your collateral is yours. You won’t necessarily be able to access it whilst you have a loan outstanding but the gains do accrue to you.
The same is true if the cryptoassets you lodge as collateral experience a hard fork. Once your loan is repaid, all collateral, including the proceeds of any new forks, will be sent to you in full.
In the event your collateral does increase in value and you want to exploit that during the term of the loan you have two main options. You can leverage your lower LTV rate by increasing the size of your loan, or you can ask BlockFi to liquidate part of the collateral and repay part or all of your existing loan early. Early loan repayments will reduce your interest payments for the duration of the loan.
Blockfi Loan Margin Calls and Liquidation
If the value of your collateral decreases significantly, a ’Trigger Event’ could occur, also known as a margin call.
Should this happen, Blockfi will request you lodge additional collateral into your account, or to pay down your loan balance in order to bring your account back in line with the agreed LTV.
BlockFi’s first trigger event happens at a LTV of 70%, which means your collateral would have fallen 50% from when you took the loan out.
On receiving notification of a Trigger event you will have 72 hours to rebalance your LTV. You can do this by sending BlockFi additional collateral or by paying down some of your loan.
If you don’t do rebalance your account within 72 hours, BlockFi will liquidate some of your collateral to do so unilaterally. If BlockFi actions a collateral liquidation, they will charge you a 3% liquidation fee.
Blockfi Interest Rates
BlockFi’s interest rates start at 7.9% APR for U.S customers. Non-US business customers have access to a wider range of interest rates ranging from just under 4% to over 14%, depending on the loan term and other factors.
BlockFi loans are interest-only. This means throughout the term of the loan you will only make interest payments and you won’t make any principle repayments. The principle is repaid in full at the end of the loan term.
BlockFi has began to offer a range of available interest rates based on the collateral LTV. The higher percentage collateral you lodge the lower the interest rate, and vice versa. The exact terms available for you to chose from will appear in the loan offer document sent to you.
Blockfi Loan Term
BlockFi loans have a fixed 12 month term but can be repaid at any time in part or in full at no additional cost. Non-US business customers have access to a wider range of loan term options, ranging from 3 months to 12 months.
Regardless of the loan term or whether you repay some or all of it early, interest on BlockFi loans is only due for the loan amount outstanding and for the period you borrowed.
In the event you want to extend your loan after the initial 12 month term, refinancing options are available.
Once your loan is paid off your collateral will be released to you usually within 3-5 business days.
BlockFi Loan Disbursement & Interest Payments
BlockFi disburses it’s crypto-backed loans by USD and the GUSD and PAX stable coins. They plan to support additional fiat currencies in the first quarter of 2019.
Monthly interest payments and principle repayment can be made via wire, automated ACH or various cryptoassets. Payments are managed by BlockFi’s loan servicer Scratch.
Blockfi Loans Minimums and Maximums
Blockfi’s minimum loan amount is $2,000 and maximum loan amount is $10 million. We have been advised higher loan amounts are available on request.
BlockFi Loan Eligibility and Credit Checks
BlockFi offers crypto-backed loans to individuals and businesses across the globe. If the country is not on a US sanctions list, there’s a good chance BlockFi loans are accessible there.
BlockFi loans do not have any specific eligibility requirements in terms of age, income or employment status. The sole eligibility requirement, apart from being able to post the necessary collateral is that the party does not have any outstanding, unresolved tax liens.
Blockfi performs Know You Customer (KYC) and Anti-Money Laundering (AML) checks using leading identity verification software company Onfido.
Blockfi reviews your credit history and various public records as part of its assessment on whether to provide a loan but does not do hard or soft credit checks. Neither do they report payment data to credit bureaus.
As part of the application process you’ll need to provide personal information such as your home address, date of birth, and if in the US, your social security number. You may also be asked to upload copies of your government ID such as a passport or drivers licence.
Blockfi will also ask about the source of your collateral and what you plan on using the loan for.
BlockFi charge loan origination fees of between 1-2%. So a $10,000 loan would incur an origination fee of between $100-200.
BlockFi’s origination fees are deducted from the loan and paid in full before the loan is dispersed. So in the example of borrowing $10,000 with a 2% BlockFi loan origination fee you would only receive $9,800 into your bank account but owe $10,000.
BlockFi also charge 2 types of late fee. If a payment bounces you’ll be charged a $15 payment failure fee, and if you miss a payment by more than 10 days you’ll pay the greater of 5% of the payment due or $15.
BlockFi Support and Customer Service
We’ve found support response times to be quick and questions we’ve asked have been answered in detail.
Areas for Improvement
We would like to see a broader range of collateral options being supported as well as being able to receive and pay back loans in a larger number of fiat currencies.
Aspects of the service such as loan approval and document signing are not yet automated and can take time to be completed. We’d like to see the entire lending product automated and able to be completed in real-time, in one session, without having to wait for manual lending decisions to be made or for documents to be emailed. (BlockFi have told us the entire loan origination process with be fully automated before the end of 2018).
Working with Scratch, the 3rd party loan servicer, means customers have to manage relationships with both BlockFi and Scratch. This results in multiple account control panels and support access points. We’d like to see all BlockFi related activity taking place in a single unified control panel. This would make account management far easier.
The BlockFi platform and loan paperwork remain targeted specifically to US customers despite BlockFi recently beginning to accept non-US business customers. It would be good to see loan agreements and account management tools become less US specific which would make it easier for international customers.
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