Why Liquid Loans Is a Game-Changer

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By Connor
Estimated reading: 4mins

We’ve all heard of ‘buyer’s remorse’, but have you ever heard of seller’s remorse?

In crypto, seller’s remorse is when you sell a token just before it starts going up in price. You then watch in horror as the price just keeps going up and up and up, and you start calculating how much better it would have been to just hold onto it.

Yep, seller’s remorse can be pretty painful – but with Liquid Loans, you don’t have to worry about experiencing it as you can extract value from your crypto while still retaining ownership of it.

Sounds too good to be true? It’s not – it’s called collateralized borrowing, and it’s been going on forever. Keep reading to learn how using Liquid Loans could be one of the best financial decisions you ever make.

Having your cake and eating it too

Currently a Liquid Loan can only be taken out against Pulse, the native token on the PulseChain network. We may expand to other networks/blockchains in the future, but for now, let’s look at a real-world example of taking out a Liquid Loan on PulseChain.

Note: this example is of a situation where the borrower (that’s you) wants to avoid liquidation. However, you should know that getting liquidated is not always a bad thing.

Playing it safe with a small loan

Let’s say you invested $1000 in Pulse, and your investment was very successful, turning into $1,000,000. This would be a 1000X, certainly not unheard of in the world of crypto – especially when we consider HEX did a 10,000X in just 623 days.

Now let’s say you decide you’d like to buy a fancy car, a $100,000 Range Rover, for instance. Without Liquid Loans, you would have to sell close to $200,000 of your crypto to cover the fees and the taxes, and then you’d go and buy the Range Rover.

But with a Liquid Loan, here’s what you would do:

1. Connect your wallet to Liquid Loans

Head to liquidloans.io and launch the dApp. Next, follow the prompts to connect your wallet.

2. Create a Vault

Choose how much of your Pulse you want to use as collateral, then follow the prompts Remember, the maximum you can borrow is 90.09% of the value of the Pulse you place into the Vault.

In other words, you must always have a minimum collateral ratio of 110% or you risk being liquidated (which definitely isn’t always a bad thing).

3. Borrow against your Pulse

Let’s say you chose to place all your $1,000,000 worth of Pulse into your vault. If you were to then borrow the $100,000 for the Range Rover, your collateral ratio would be 1000%, which is a nice and safe level to protect from liquidation.

4. Send the USDL to your exchange

Once the USDL appears inside your exchange dashboard (e.g. Coinbase), you can then swap it into fiat currency, and move it to your bank account.

5. Go buy that Range Rover

Roll down the windows and pump up the tunes – you’re now the proud owner of a shiny new SUV.

6. Tell your accountant come tax time

Typically, loans are tax-free, so you may not have to pay capital gains tax on your loan. However, if you have any doubt regarding the tax laws in your jurisdiction or your personal circumstances, you should definitely speak with your accountant before taking out a Liquid Loan*. #notfinancialadvice

7. Watch your Pulse grow (hopefully)

While you’re enjoying your new car, your Pulse is likely to be growing in value, further reducing your chance of being liquidated. It’s up to you whether you choose to pay off your loan, or simply leave things as they are.

Because you only borrowed $105,000 against $980,000 of collateral (in the form of Pulse), your collateral ratio is 933.33%, which is quite a safe level of collateralization to avoid liquidation.

8. Stake your LOAN tokens

Liquid Loans is more than just a borrowing platform – it’s a very powerful investment tool as well. To learn what LOAN token is, and how it can work hard for you to generate serious ‘interest’, click here.

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Disclaimer:Please note that nothing on this website constitutes financial advice. Whilst every effort has been made to ensure that the information provided on this website is accurate, individuals must not rely on this information to make a financial or investment decision. Before making any decision, we strongly recommend you consult a qualified professional who should take into account your specific investment objectives, financial situation and individual needs.

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Connor is a US-based digital marketer and writer. He has a diverse military and academic background, but developed a passion over the years for blockchain and DeFi because of their potential to provide censorship resistance and financial freedom. Connor is dedicated to educating and inspiring others in the space, and is an active member and investor in the Ethereum, Hex, and PulseChain communities.

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