Nebeus is a Crypto-backed Loans Platform that allows crypto-investors to get cash loans by pledging crypto assets, such as Bitcoin, as collateral.
It’s simple, but loan terms are risky when it comes to dreaded margin calls.
What’s a Margin Call?
Nebeus uses crypto as collateral, locked to cover the loan amount. It’s helpful to think of the collateral as ‘loan insurance’ because you commit to keeping the value constant when you take out a crypto-backed loan.
Margin calls occur when the value of the borrower’s collateral, such as Bitcoin, falls below the level required by the lender to rebalance the loan-to-collateral ratio.
A margin call is the lender’s request that a borrower deposits additional collateral or sells part of their pledged assets so the account reaches the minimum value, known as the maintenance margin. It’s best to keep some extra collateral in your wallet so that if the price drops, Nebeus instantly adds the appropriate margin to maintain your loan.
To keep things fair, if the market rises, Nebeus makes sure the extra crypto is returned to you.
If you don’t want to (or can’t) contribute more crypto, you can close your loan by contacting Nebeus’ support team. If they don’t hear from you, their final resort is to liquidate your loan and return the remaining crypto.
Nebeus will notify you via email if your loan is nearing a margin call and your Crypto collateral is at risk.
Margin Call Risks for Crypto-Backed Loans
Crypto-lending companies use margin calls to protect the lender’s capital as using cryptocurrency to receive cash loans carries risks for them. Lenders must ensure their capital is secure to provide borrowers with cash loans.
As such, borrowers are exposed to certain risks too, including the sudden need to pledge additional crypto. Other risks to consider are:
- You’re not using a typical, steady asset to borrow as crypto is volatile.
- Having to liquidate your collateral if you can’t cover the margin call.
- Locking your assets used as collateral until the loan ends.
Nebeus’ Free 10 Day Buffer
With Nebeus, you get the unique (and free) benefit of margin call protection for 10 days.
Celsius, another crypto-backed loan lender, gives only 24 hours to act on a margin call. Nebeus’ 10 days (240 hours) gives you the space to decide without feeling rushed.
If you do nothing regarding a margin call, you can still escape liquidation within ten days by:
- Adding Collateral Manually – To keep your loan.
- Paying Back Your Loan Early – To get crypto collateral back immediately.
- Enabling Auto Margin Call Management – Nebeus will automatically monitor and refill your collateral via your account.
The best part? If crypto prices rise during the ten days of the margin call, Nebeus will automatically cancel the margin call, allowing your loan to continue as usual.
If you don’t respond within 10 days, your collateral will be liquidated, and the balance refunded to your Nebeus account.
Auto Margin Call Management
With a Nebeus loan, you can opt for Auto Margin Call Management for only an extra 2% yearly interest.
First, it monitors the price volatility of the cryptocurrency you’ve used as collateral.
Second, for margin calls, it instantly refills collateral from your main Nebeus account if you have the same currency stored there. This fully automated process keeps you:
- Relaxed as automated monitoring removes the need to check markets constantly.
- Calmed as your loan will be topped up on its own.
- Comforted as your collateral is protected against unpredictable markets.
On both the desktop and Nebeus app, you may enable Auto Margin Call Management while requesting your loan.
What is the Health Loan Monitor?
Each Nebeus loan has a Loan Health Monitor that automatically assesses your loan’s health by comparing its fixed exchange rate to daily cryptocurrency exchange prices. The result is displayed in your active loans tab to help you stop your collateral from liquidation.
Remember that your loan is computed using that day’s cryptocurrency exchange rate, fixed for the loan’s duration. However, your loan’s health fluctuates with cryptocurrency exchange-rate swings.
- Healthy – the current exchange rate is over your loan’s fixed rate.
- Dangerous – the current rate is close to your loan’s fixed rate, and a margin call is likely.
The status will change to healthy if you provide more collateral. You can do this through Auto Margin Call Management or manually add collateral.
Benefits of Crypto-Backed Loans
Crypto-backed loans may be new, but they provide a vital service to individuals needing cash for a new home, business venture, car, or vacation.
Not only do these loans bring together crypto and traditional banking, other benefits include:
- Lower interest rates than usual.
- No credit check or income proof is required.
- Same-day and instant loans.
Additionally, Nebeus’s loans save you from paying unneeded taxes as you are not selling your crypto, only using it as collateral.
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