Nearly a quarter of US investors used loans to buy crypto
A large number of private investors in the United States have taken out loans, often at exorbitant interest rates, to buy cryptocurrencies, and more than half of such investors ended up losing money, according to a recent survey by DebtHammer.
DebtHammer surveyed more than 1,500 people in the United States to find out about their crypto-investment habits and how they affect the already indebted nation.
Loans for crypto investments
Over 21% of crypto investors said they have used a loan to pay for their crypto investments, according to the survey.
Personal loans seem to be the most popular choice among investors, since over 15% of them said they have used one to finance their cryptocurrencies. Many also used payday loans, title loans, mortgage refinancing, mortgages and even the remaining student loan funds to obtain crypto.
About 1 in 10 investors who used a payday loan used it to buy cryptocurrencies. Most people borrowed between $ 500 and $ 1,000 to invest in crypto, the survey showed. Researchers at DebtHammer noted, however, that these were risky purchases despite the small amount borrowed, as payday loans average around 400% APR.
Retail investors who used loans to buy crypto said that their purchases have not always been fruitful. Nearly 19% of respondents said they have struggled to pay at least one bill due to their crypto investments, while around 15% said they have worried about evicting, banning or taking back a car. Payday loan users seemed to have suffered a little less, with only 12% reportedly struggling to pay a bill or worrying about evictions, foreclosures or repossessions.
Loans are not the only way investors buy cryptocurrencies when they are short of money.
According to the survey, more than 35% of respondents said they have used a credit card to buy crypto. While around 20% of them paid it down when the bill fell due, 14% said they paid it step by step with either an introductory offer of 0% APR or at full interest.
All the money borrowed went to just a handful of cryptocurrencies. The survey showed that more than half (54%) of the respondents used the borrowed money to buy Bitcoin (BTC). Dogecoin (DOGE) came in second place, with almost 35% of respondents saying that they bought the token with a loan, while just under 30% said that they bought Ethereum (ETH).
Just under 23% of those who borrowed money to buy cryptocurrency said they did so because cryptocurrencies fell sharply. About 15% said they considered cryptocurrencies a good long-term investment, while 17% said cryptocurrencies were “historically low”.
A remarkable percentage of respondents (18.5%) said they borrowed money to buy cryptocurrencies because they were offered a 0% promotional rate by their credit card company or bank.
However, not everyone who plays wins.
Of those who borrowed money to invest in cryptocurrency, around 60% lost money. And while over a third of them lost $ 1,000 or less, 6% said they lost between $ 50,000 and $ 100,000, and 5.5% said they lost more than $ 100,000.
Investing in borrowed cryptocurrencies does not mean significant gains either. The majority, or 27%, received only up to $ 1,000, while only 7.5% received between $ 1,000 and $ 5,000.
