BTCJam is currently the most popular platform for peer to peer Bitcoin lending. Since the loans are in Bitcoins and not cash, BTCJam has its own credit review process. You have to complete several steps in order to take out Bitcoin loans. If you want to invest, you can do so immediately as soon as you deposit Bitcoins to your account. The following are some tips from my experience getting loans and investing with BTCJam:
You must confirm your identity and link your Paypal account – This is the minimum requirement to get a loan listed on BTCJam. The identity verification process takes a few days. You will have to upload a document such as a driver’s license or passport. Then they might ask you to take a picture of yourself holding the document and upload that.
BTCJam uses several unconventional factors to determine your creditworthiness – To improve your credit score on BTCJam further, you have the option to link your Facebook account, Linkedin, Ebay account, and Coinbase account. You can also have your friends write you recommendations from Facebook. You can also submit your social security number to have them verify your real credit score. Personal information will never be released to investors, but it helps them determine that you are real person with integrity.
You must get several small loans to build your reputation – When you complete your profile, expect a D+ or lower credit score. To get a higher credit score, you will have to create a small loan listing, ideally 0.5 BTC or less and offer a high interest rate (15% or higher). Name this loan “Reputation Loan” and you will get funded within a few days. Then immediately pay back the loan plus interest as soon as you activate it. BTCJam will then improve your credit score, and investors may give you a positive review. Take out and pay back several small loans to improve your credit score. This will allow you to take out larger loans at lower interest rates.
BTCJam is a community – BTCJam isn’t just a Bitcoin lender and investor, it’s a community of real people. There are people there that make investments on a regular basis, and people that take out loans frequently, and are trusted by the rest of the community. Unlike a bank loan, you will be expected to respond to investor questions as your loan is getting funded. Ignoring questions or comments is an automatic red flag in the rest of the investor community.
You Can Either Take out loans in Bitcoin or Bitstamp USD – If you take out a Bitcoin loan, you will have to pay back the exact amount of Bitcoins that you borrowed plus interest. This is great if you are mining, and expect a return in Bitcoins and you will be unaffected by the exchange rate. However, if you take out a Bitcoin loan, and the exchange rate goes up dramatically, you could end up owing way more in US dollars than you borrowed. Therefore, there is the option to take out a loan with Bitstamp USD. This is a Bitcoin loan tied to the US dollar. This means that you are immune to fluctuations in the exchange rate.
Interest Rates are Much Higher than Other Peer to Peer Platforms – With the risk of Bitcoin related investments comes higher rates. Even someone with a good credit score can expect to pay 5-10% interest per month on a loan. A brand new listing can expect to pay 15% interest in a week. You can make considerable returns here if you are an investor.
BTCJam is a platform that is successful, though you will have to be patient jumping through all the hoops to get a good sized loan. You will have to upload documents and verify accounts and be patient as investors fund small reputation loans over and over again.