What is a secured loan?
A secured loan is a loan in which the borrower pledges something as collateral for the loan. An example of a secured loan is mortgage or a car loan. In our case, the borrower gives to the lender an amount of money to hold as collateral for the loan he or she receives in bitcoin.
Why a secured loan is better than a regular sale?
Bitcoin transactions are irreversible like cash. In contrast, credit card, debit card, and PayPal payments can all be reversed. When you sell bitcoin to someone, you have a risk that a dishonest buyer will perform a chargeback and get his money back from you.
Secure lending solves this problem by giving bitcoin as a loan. A borrower has to pass a verification process and a credit risk assessment. The borrower also signs a legally binding loan agreement, according to which he or she needs to return bitcoin within one day, if his security deposit payment is cancelled.
How does issuing a secured loan work?
Issuing a secured loan works almost like a regular sale. The borrower send the loan amount in dollars plus the interest fee to your PayPal account. After that, the corresponding amount of bitcoin is deduced from your xCoins and sent to the borrower.
How does your peer-to-peer platform work?
At xCoins, any user can be a borrower or a lender. When a borrower requests a bitcoin loan, the platform matches the borrower with a lender. The process is automatic and seamless. No communication between the borrower and the lender is required. The borrower makes a payment directly to the lender on the lender's PayPal payment page. After the payment is made, bitcoin is automatically transferred to the borrower's wallet.
How much does it cost?
xCoins is free for lenders. The borrower pays the interest fee to the lender. The borrower also pays the loan origination fee (xCoins commission) and the PayPal processing fee of 2.9% + $0.30 on top of the loan amount and interest.
How much will I earn?
You can set your own interest fee that you would like to receive from each transaction. If you are new to secured lending, we would recommend setting the fee at 15% in the beginning, then increase or lower it, depending on market conditions.
The interest fee is your income. Borrowers pay the xCoins loan origination fee and the payment processing fee on top of your interest.
What are the risks?
Lending bitcoin has risks associated with it. Like with any lending, there is a certain percentage of bad loans. You should expect a portion of your interest income to be lost due to payment reversals. At xCoins, we carefully vet borrowers to keep the losses low. We are proud to say that the bad loan ratio in our system is in low single digits, which allows our lenders to receive double-digit profits!
What is the loan origination fee for?
The loan origination fee is the xCoins commission for the service. It can be 5% of the loan amount or higher, depending on your lending volume. The loan origination fee is paid by the borrower. For this fee, xCoins performs the following:
- Finding borrowers through advertising and other sources.
- Matching borrowers with lenders.
- Borrower identity verification and credit risk assessment.
- Manual document review, in some cases.
- Loan origination automation.
- Customer support.
We answer hundreds of borrower emails, so you do not have to. We also pay to third party vendors for borrower identity verification and credit reports.
Do I need to pay PayPal commission?
No, the borrower pays PayPal commission in the amount of 2.9% + $0.30 on top of the loan amount and interest. Note that PayPal fee is not counted as a percent of the loan amount. It is counted as a percent of the total payment to PayPal.
Do I need a PayPal account to use your system?
Yes, as a lender, you need a working PayPal account to use the system. Borrowers will send security deposit payments plus your interest fees to your PayPal account.
Can I receive the deposit plus fee to my bitcoin wallet instead of PayPal?
Unfortunately, no. Borrowers come to xCoins to obtain bitcoin on the first place. If they had bitcoin already, they would not come here to begin with. They cannot give you the collateral in bitcoin, because they do not have any. They can, however, pay to you with credit or debit card, and they are ready to pay a premium for it. Therefore, you need a PayPal account to accept their payment.
I deposited bitcoin to my xCoins wallet. When will I get my profit?
Once you deposit bitcoin to xCoins wallet and turn lending on, you just need to wait for the borrowers to arrive. The time how long it takes for a borrower to arrive depends on your maximum lending amount. Most bitcoin requests are within $50.00 – $500.00 range. If your investment amount is in that range, it will take about an hour or two for a borrower to make a payment to your PayPal. If your maximum lending amount is $20.00 or so, it can take up to one day.
My bitcoin lending is active. What do I need to do next?
You do not need to do anything else. xCoins finds borrowers for you automatically. Once you are matched with a borrower, he or she will make a payment directly to your PayPal account. You will get a notification from us and from PayPal, when that happens.
If you selected specific borrower(s) that you wanted to issue loans to, they will be notified by email. However, if they do not respond, you will be matched with any other borrower with a similar loan amount on a first come first serve basis.
I have not received any loans in a couple of days. Is something wrong?
This is normal. By default, our system limits the lending volume for new lenders and increases it gradually every week. If you reach the volume limit, your lending will be paused temporarily and then resumed automatically.
If you do not wish to limit your lending volume, you can remove the limit in the "Lend Bitcoin" -> "Lending Limit" menu by unchecking:
[x] Increase the lending volume gradually
Note, removing the volume limit is not recommended, unless you have previously processed high volumes with your PayPal account.
How can I withdraw bitcoin after I deposit it to my xCoins wallet?
xCoins wallet works as a regular full-featured bitcoin wallet. Your funds are not "frozen" in your wallet. You can withdraw them at any time. Our program will keep track of how much is available for lending, based on your maximum lending amount and your current balance. To withdraw bitcoin, click on "My Wallet" on the main menu and select "Withdraw bitcoin."
When will the borrower pay the loan back to me?
The borrower pays to you two times. The first time, he or she pays the security deposit plus fee to your PayPal account. This happens before bitcoin is sent to the borrower. You receive the value of your bitcoin and your profit with that payment.
When the borrower decides to return bitcoin back to you, he or she will send bitcoin back to your bitcoin wallet. You will need to make a payment for the corresponding amount of dollars to his or her PayPal account or by other payment method. The lending agreement does not define, when the borrower needs to return bitcoin back.
The borrower is responsible for all payment processing and bank transfer fees.
Do I need to hold on to the security deposit, until the borrower decides to return bitcoin back to me?
No. You may do with the security deposit as you please. In the event if/when, the borrower decides to give bitcoin back to you, he or she will need to send bitcoin to you first. You can convert that bitcoin to dollars and give the dollars back to the borrower as the security deposit.
According to the lending agreement, a borrower can only return bitcoin back to you in the amount equivalent to the dollar value of bitcoin on the day/time, when the loan was issued.
The recommended strategy is to convert your security deposit and interest fee to bitcoin at an exchange and reinvest them again for another round of lending.
Will I lose money, if bitcoin price falls, and a borrower decides to return it back to me?
No. According to the lending agreement, a borrower can only return bitcoin back to you in the amount equivalent to the dollar value of bitcoin on the day/time, when the loan was issued.
Will I lose money, if bitcoin price raises, and a borrower does not return it back to me?
If you sell any asset, which increases in price after you sell it, you may potentially lose money. However, if you convert your security deposit and fee it back to bitcoin immediately and reinvest it for another round of lending, you will always come out on top.
How do I contest a PayPal payment reversal (chargeback)?
If you receive an email from PayPal titled "Case opened: Case ID ..." it means that a borrower disputed one of the payments to you with PayPal, claiming that he or she did not receive the product or did not authorize the payment. You will need to respond to this dispute to contest the payment reversal.
To respond to a dispute, you will first need to download the delivery confirmation for that transaction. The delivery confirmation document contains a proof of bitcoin delivery and a proof that the borrower authorized the payment. To download the document, follow these steps:
- Go to the Activity screen in your xCoins account.
- Click on the magnifying glass icon to search. Enter the PayPal payment ID or PayPal dispute case number. If that does not work, try searching by the borrower's last name.
- Click on the transaction status icon to open the Transaction Details screen.
- Scroll towards the bottom of the Transaction Details screen and click on the "Delivery Confirmation" link.
After you download the agreement, click on the "Dispute Instructions" link. Follow the instructions to respond to the dispute in PayPal.