3 Ways to Use Fixed-Rate Loans as a Passive User

Strategies for passive users to utilize fixed-rate loans with Term Finance
July 13, 2023

DeFi borrow/lend markets can seem daunting to the average investor but it doesn’t have to be. Here are 3 ways to use fixed-rate loans as a passive user on Term Finance.

Passive Lending Stories in Crypto

Diego the Argentine Doctor

Diego is a busy doctor in Argentina who likes to unwind on the weekends by camping and hanging out on the beach on the weekends.

He’s been saving diligently for retirement, and because he’s worried about potential devaluations of the Argentinian Peso, he holds a significant portion of those savings in USDC.

He’s also worried about inflation eating into his capital, so he wants to generate a return on his USDC. But because he doesn’t have access to the U.S. banking system, his options are limited.

And because this is his nest egg, capital preservation is important—he doesn’t need to take unnecessary risk for unnecessary returns.

Fortunately, a friend introduced Diego to Term Finance. Diego discovered he could lend out his USDC for three months at a fixed 3.5%, with no concern about the rate plunging from changes in the market. And because those loans are backed by highly liquid majors such as BTC and ETH, he’s less worried about default. Now Diego can relax on the beach.

Passive Borrowing Stories in Crypto

Winston the Whale

Winston is an early adopter of emerging technologies. After years of accumulating and hodling ETH he found himself in the fortunate position of being a so-called “ETH whale.”

Winston also wants to renovate his home, but he’s determined not to sell his ETH—after all, it’s still early.

He tries a traditional home-equity loan, but banks are quoting him at rates north of 8%.

He tries variable-rate DeFi lending protocols, but finds that his borrowing costs could spike at any time without warning, which would put stress on his funds at hand—it could even force him to sell his ETH!

Using Term Finance, Winston can borrow USDC against his ETH. He keeps his ETH and locks in rates that are potentially much lower and more predictable than his alternatives. Winston is happy.

Ella the ETH Staker

Ella is a high school graduate who has always had a strong work ethic. She tried her hand at various social media endeavours and recently found success doing marketing campaigns for various crypto companies.

Now Ella is interested in gaining financial independence by letting her money work for her. She’s been putting every extra dollar saved into staked ETH.

She recently learned that she can increase her exposure to staked ETH by borrowing USDC against her wrapped staked ETH and using those proceeds to acquire more staked ETH. By locking in a fixed rate on her borrow, she feels reasonably confident that she will earn more on her re-investment than she pays on her USDC borrow.

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