This comprehensive guide explains Gate.io's collateralized loans and leveraged borrowing features—two powerful strategies that operate differently despite superficial similarities. We'll break down each method to help you understand their distinct mechanisms and optimal use cases.
Key Differences Between Collateralized Loans and Leveraged Borrowing
| Feature | Collateralized Loans | Leveraged Borrowing |
|---|---|---|
| Mechanism | Pledge one crypto to borrow another | Use margin to borrow leveraged funds |
| Leverage Ratio | Up to 1.7x | 2x–10x |
| Interest Rates | From 4% APR | From 0.01% daily (3.65% APR) |
| Risk Level | Lower (auto-liquidation at 90% LTV) | Higher (variable liquidation thresholds) |
| Eligible Collateral | BTC, ETH, USDT, EOS, GT | Hundreds of cryptocurrencies |
| Borrowable Assets | Hundreds of options | Hundreds of options |
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Collateralized Loans: How They Work
Definition: Lock specific cryptocurrencies as collateral to borrow other assets, paying interest during the loan term.
Supported Collateral: BTC, ETH, EOS, GT, USDT
Loan-to-Value (LTV): Maximum 70% (1.7x leverage)
Auto-Liquidation: Triggers at 90% LTV
Step-by-Step Borrowing Process
- Navigate to Gate.io's Crypto Loan interface
- Search for your desired borrowing asset (e.g., ETH)
- Select a lending offer (check interest rates and available amounts)
Configure:
- Loan amount
- Collateral type (USDT/BTC/EOS/GT)
- LTV ratio (lower = safer)
- Enable auto-renewal for continuous borrowing
- Confirm the transaction with your funding password
Example: Borrowing 0.1 ETH (~$260) with $370 USDT collateral yields 70% LTV.
Leveraged Borrowing: Amplified Opportunities
Definition: Borrow 2x–10x your margin to trade larger positions.
Key Metric: Risk Rate = (Total Asset Value / Borrowed Value) × 100%
Liquidation Thresholds:
- 3x–5x leverage: 110% risk rate
- 10x leverage: 105% risk rate
Execution Walkthrough
- Access the Leverage Borrowing page
- Transfer margin to your leveraged account (e.g., 100 USDT)
- Choose a trading pair (BTC/USDT supports 10x leverage)
- Borrow funds (e.g., 400 USDT = 5x leverage)
- Monitor your risk rate to avoid liquidation
FAQs: Your Crypto Loan Questions Answered
1. Which is safer: collateralized loans or leveraged borrowing?
Collateralized loans carry lower risk with capped 1.7x leverage, while leveraged borrowing's higher multiples (up to 10x) increase volatility exposure.
2. How is interest calculated?
Interest accrues hourly (minimum 4-hour charge). Collateralized loans use annualized rates, while leveraged borrowing uses daily rates convertible to APR.
3. What happens if my collateral value drops?
For collateralized loans, positions auto-liquidate at 90% LTV. Leveraged positions trigger margin calls when risk rates hit platform-specific thresholds.
4. Can I repay loans early?
Yes—both loan types allow early repayment without penalties, with interest charged only for actual borrowing duration.
5. Which crypto pairs have the lowest interest rates?
Stablecoins (USDT/USDC) typically offer the most competitive rates across both loan types.
6. How do I avoid liquidation?
Maintain conservative LTV ratios (≤70% for collateralized loans) and monitor leveraged positions during high volatility.
Strategic Recommendations
- New Traders: Begin with collateralized loans to practice risk management
- Experienced Traders: Utilize leveraged borrowing for strategic positions during high-conviction market movements
- Risk Mitigation: Always enable price alerts and maintain buffer funds
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Disclaimer: This content is for educational purposes only. Cryptocurrency trading involves substantial risk—always conduct independent research before engaging with leveraged products.
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