Request a Celsius Network Loan When You Need Cash. Avoid the Taxman Too
Celsius has filed for Chapter 11 protection from creditors in U.S. courts. All all crypto deposited with Celsius remains unavailable.
If you continue to read any of the Celsius pages on CryptoRetirees.com, do so for informational purposes only. Do not join Celsius at this time.
I’ve removed all Celsius signup buttons and references to joining Celsius until I know more about the outcome of Celsius Network’s restructuring, and whether it will still be a viable way to earn retirement income.
In many countries, including the U.S., Canada and the U.K., crypto transactions are taxable.
That means that any time you withdraw crypto from your Celsius account, you have to report the transaction on a tax form. And you’ll end up paying tax on any capital gain you earned.
Instead, you could request a Celsius Network loan to meet your cash needs. And since you’re not disposing of your crypto, there’s no taxable event, no reporting required, and no tax to pay.
Combine that with an interest rate as low as 1% (or lower if you have CEL tokens) to keep your borrowing costs down, especially compared to the rates from your bank.
This article outlines how to request a Celsius Network loan using the mobile phone app.
At this time, the mobile app is the only option for loan requests. The website’s page about Loans will direct you to the app.
The Borrow Screen
To begin, tap on Borrow in the bottom right of the app.
Tap on Borrow to begin the loan request process.
That takes you to the Loan Overview screen.
The Loan Overview Screen
The Loan Overview screen. Tap on either button.
Tap on Calculator if you want to do some math on your loan before requesting it.
Tap on Apply for a loan if you’re ready to proceed.
The Calculator Screen
The initial calculator settings indicate that the minimum amount you can borrow is $100.
To begin, tap on $100 min to enter how much you want to borrow. Then tap to select the coin/token you want to use as collateral.
Tap and enter the amount of the loan you’re requesting. Note that it’s in USD, whether you want a stablecoin loan or a fiat money loan.
Tap and select the coin or token you want to use as collateral. The default is Bitcoin. However, you can use any coin or token that you have on the platform.
Scroll down a bit and you’ll see how much collateral you’ll need for the loan amount you want to receive.
That amount is based on a 25% Loan-to-Value (LTV) percentage, which means that the loan amount has a 1:4 ratio with the collateral amount.
You can lower the amount of collateral you need by tapping on 33% (1:3 ratio) or 50% (1:2 ratio).
If you reduce the collateral, you’ll have a higher annual percentage rate to pay.
It’s important to keep in mind that your collateral will not earn any rewards until you pay off the loan. So you need to factor the loan period and the lost rewards during that period into your calculations.
You may decide it’s worth it to you to use less collateral and pay a higher interest rate, especially if your collateral choice is earning a high interest rate.
For example, if I want to use my USDC coins as collateral for a $1,000 loan, I can use 4,000 USDC and pay just 1% interest. That comes to $10 in interest for a one-year loan term.
Or I can go as low as using 2,000 USDC collateral and pay 8.95% interest, which comes to $89.50 for the one-year loan term. So the difference is $79.50.
The remaining $2,000 USDC would then earn 7.1% (the current rate) for the year, which comes to $142.
That’s a net gain of $62.50 for using the 1:2 collateral ratio.
The difference becomes more pronounced for longer loan terms. For a 3-year term, I’d pay $268.50 in interest (instead of $29.88), while earning $426 (if the USDC interest rate remains the same for the entire loan term), for a net gain of $187.38.
Sounds good, right? You’ll have to decide if you can afford the higher monthly interest payment though. If you pay out of your weekly rewards, that won’t be an issue.
Balloon Payment Loans
Celsius Network loans are balloon loans, or interest-only loans. You’ll pay only interest on the amount you borrow until the term ends. You then need to pay back the entire amount.
So you need to be saving enough on a weekly or monthly basis to cover the repayment. If you can’t repay it, Celsius will keep the loan amount from your collateral when the term ends.
The remainder of the collateral will then earn rewards again.
I recommend paying the loan out of fiat money, since its value is decreasing at the rate of inflation.
If you can afford to, you can pay the monthly interest in fiat as well, and let the equivalent amount of crypto continue earning interest.
If you decide to take out a loan, tap on Get a Loan to continue.
The Loan Screen
The screenshot below shows the loan application “form” with the Select Asset to Borrow overlay activated.
Select the asset you want to borrow. You can choose U.S. dollars (USD) or one of several stablecoins from the list.
Tap on the small i next to the word Principal to learn about the two types of loans — stablecoin loans and U.S. dollar loans — and how long it takes to receive the funds.
Tap on USDC to select what you want to receive. Your options are:
- USD (sent to your bank)
- TrueUSD (TUSD) (sent to your Celsius account)
- Gemini Dollar (GUSD) (sent to your account)
- Paxos Standard (PAX, or USDP) (sent to your account)
- USD Coin (USDC) (sent to your account)
- Tether (USDT) (sent to your account)
- Multicollateral DAI (DAI) (sent to your account)
- Z.com USD (ZUSD) (sent to your account)
I recommend that you not take your loan in ZUSD. It has a small market capitalization, so you may find it hard to convert it to fiat money at an exchange or convert it to another crypto coin or token using Celsius Swap.
If you live outside the U.S., keep in mind that you’ll receive a USD loan in U.S. dollars. So you’ll need a USD account at your bank, then provide the details for that account when completing the loan application.
Why Borrow in Stablecoins?
You may be asking yourself, “Why would I want to take out a stablecoin loan?” A common scenario is that you have a relative (e.g., a child or grandchild) living in Europe or Asia who needs some money.
Wiring money would be a long and involved process, and wouldn’t be cheap. Sending money via Western Union or Moneygram would cost you a chunk of cash.
If you send the money in stablecoins via CelPay to another Celsian, the recipient can send them to a local exchange for no fee, and then convert them to the local currency for a small fee.
You might also consider a form of arbitrage that factors in inflation. Earn the high rate of interest that Celsius pays on stablecoins, and pay the interest in U.S. dollars, which are depreciating.
This only works for people in the U.S. who can make payments in USD.
There’s another form of arbitrage that works if you already have some DAI or ZUSD stablecoins. At the time of writing, those are both earning only 4.6%, while the other stablecoins are earning 7.1%.
Take a loan of USDC or GUSD, for example, and use DAI or ZUSD as collateral. Earn 7.1% on the one stablecoin, and lose the 4.6% interest on the other.
Once you select the principal, tap on 100 if you want to change the amount of the stablecoin loan. Or tap on 1000 if you want to change the amount of the USD loan.
Or tap on MAX to borrow the most for the amount of collateral you have. The max amount will change based on the percentage rate you select.
Tap on 1% or 6.95% or 8.95%, which will then determine how much collateral you need.
Tap on BTC if you want to use a different coin/token as collateral. A small overlay appears, telling you how much you can borrow based on how much of each coin/token you have.
In the screenshot below, I can borrow up to $2,640 using BTC as collateral, up to $2,211 if I use ETH, or $1,256 if I use CEL tokens.
Each coin or token collateral option tells you how much you can borrow against all of that asset. You can borrow any amount up to the number indicated.
For example purposes, I’ve decided to take a $100 loan in USD, pay the 1% interest rate, and use .00883 Bitcoin for collateral.
I decided on a $100 USDC loan, at 1% interest, using .00882 Bitcoin as collateral. Now I’m ready to continue.
Tap on Continue to select your loan term.
The Term Screen
You can select any term you want, up to 60 months. Keep in mind, though, that you have to pay a minimum of six months of interest, even if you pay off the loan a week later.
Select the term of your loan. On an iPhone, tap and drag up or down to choose the term, which appears in large, bold text. Note the message that you can extend your loan, or close it early.
You can also extend your loan at the end of your selected term, if you’re not ready to pay it off at that time.
When you’ve selected your term, tap on Continue.
The Wiring Information Screen
If you chose to receive your loan principal in U.S. dollars, you’ll now see the Wiring Information screen. If you chose a stablecoin, skip to the Loan Summary screen section below.
The Wiring Information screen’s default country is the country you entered when you joined Celsius. Tap on it if you want to change to a different country.
If you’re sending the funds anywhere except the U.S., you’ll need the SWIFT code and an IBAN number. You can’t proceed to the next screen without entering an IBAN number.
Check with your bank to see if it has an IBAN number before proceeding with the loan application.
Canada doesn’t use the IBAN system, so you will not be able to send funds to Canada.
You can select another country if you want to wire the money to someone else, or to an account you have overseas.
Choose the country you want to send your principal to. Check first that the bank there has an IBAN number, as Celsius requires it.
The screenshot below is for the U.S. Notice that it requires different information that the Canada screen, including which state the bank is in.
The U.S. Wiring Information screen, which requires information specific to the U.S., including the Bank State.
Once you’ve entered all your information, tap on Continue.
The Loan Summary Screen
Read everything on the Loan Summary screen, including the information about the margin call price, and the collateral liquidation price, if applicable.
Margin calls and liquidations likely won’t happen if you’re using stablecoins as collateral, since their price doesn’t fluctuate by more than half a cent above or below $1.
Read, and understand, everything on this screen, especially the information about margin calls and liquidations.
Also note the message that the coins you use for collateral will be locked, and will not earn weekly rewards.
If you’re happy with the loan summary, and the margin call and liquidation prices (if applicable), tap on Continue.
Terms and Conditions Screen
Read the first two paragraphs. Tap on 1. DEFINITIONS to display the definitions. Tap on each number subheading to display the contents of that section of the terms and conditions.
Each heading in ALL CAPS can be tapped to display the contents of that section.
Pay particular attention to 6. EARLY REPAYMENT and 10. RETURN OF COLLATERAL.
Tap on 6. EARLY REPAYMENT to read about the terms for repaying your loan early.
Also note in 12. REFINANCING that if your collateral increases in price (e.g., Bitcoin’s price increases by 20%), you can refinance your loan, which will allow you to borrow more or unlock some of your collateral so that it can begin earning rewards again.
When you reach the bottom of the screen, tap on I have read and agree to the terms and conditions above.
Tap anywhere on I have read and agree to the terms and conditions above.
I recommend that you download the terms and conditions so that you have them on file. Tap on Download T&C to do that.
A green checkmark will appear in the box and the Submit loan application button will activate. Tap on it to complete your request for a Celsius Network loan.
Tap on Submit loan application to complete the loan application process.
You’ll hear back from the Celsius Loans department in 1-2 business days, sometimes the same day.