In the rapidly evolving world of decentralized finance (DeFi), one of the most powerful financial tools available is the ability to borrow against crypto holdings. This innovative approach allows investors to unlock liquidity without selling their digital assets—preserving long-term positions while accessing funds for trading, yield farming, or real-world expenses.
Whether you're a seasoned DeFi user or just beginning to explore on-chain finance, understanding current crypto borrowing rates, platform options, and associated risks is essential for making informed decisions.
Current Crypto Borrowing Rates (June 2025)
As of June 2025, borrowing costs across major DeFi protocols vary significantly depending on the asset and platform. Below is a snapshot of the latest annual percentage rates (APR) for popular tokens:
- USDC: Ranges from 0% on Compound to 0.62% on Aave v3
- USDT: Available at 4.16% on Aave v3 and 5.76% on Compound
- WETH: Competitive rates between 1.29%–1.34% on Aave v2 and v3
- WBTC: As low as 0.24% on Aave v3
- DAI: 5% on Aave v3, with higher rates on older versions
Stablecoins like USDC and DAI continue to offer some of the lowest borrowing costs, especially on newer protocol versions where capital efficiency is prioritized. Meanwhile, platforms like Spark and Morpho leverage integrated modules to maintain consistently low rates through enhanced liquidity pooling.
Rates update every 30 minutes and are influenced by supply-demand dynamics within each lending pool.
👉 Discover how to access low-rate crypto loans with advanced DeFi tools.
Why Do People Borrow Against Crypto?
There are two primary motivations behind crypto-backed borrowing: obtaining leverage and avoiding taxable events.
Obtaining Leverage
Borrowers often use their crypto as collateral to amplify market exposure. For example:
- Deposit ETH and borrow USDC to purchase more ETH, increasing upside potential.
- Borrow ETH against stablecoins to short-sell in a bear market, then repurchase at a lower price.
This creates synthetic leveraged positions without relying on centralized margin trading platforms.
Avoiding Taxable Events
Selling crypto can trigger capital gains taxes. By borrowing instead, users gain liquidity while maintaining ownership—deferring tax liabilities and preserving long-term investment strategies.
While some centralized platforms once offered fiat loans against crypto, many collapsed after 2022’s market downturn. Today, DeFi lending platforms provide a more resilient, transparent alternative.
Top DeFi Borrowing Protocols in 2025
Aave
Aave remains a leader across 14+ EVM-compatible chains, including Ethereum, Arbitrum, and Optimism. It supports borrowing of stablecoins, ETH, liquid staking tokens (LSTs), and DeFi assets.
Key features:
- Dynamic interest rates based on utilization
- Flash loans with a 0.05% fee (no collateral required)
- GHO: Aave’s native overcollateralized stablecoin
- Staking AAVE tokens offers 5–7% APY and fee discounts
Governance decisions allocate up to 20% of borrower interest to the DAO treasury.
Sky Protocol (Formerly MakerDAO)
Rebranded in 2024, Sky Protocol powers USDS and DAI issuance through overcollateralized vaults. Supported on Ethereum, Base, and Arbitrum, it enables borrowing via Summer.Fi with stability fees ranging from 0.5% to 5%.
Users can:
- Stake USDS or DAI in the Sky Savings Rate (SSR) to earn yield
- Participate in governance via SKY token voting
Its Direct Deposit Dai Module (D3M) integrates liquidity from Aave and Compound, helping keep rates competitive.
Compound
Operating across 10+ chains, Compound uses a single-borrow asset model per market (e.g., only USDC can be borrowed in the USDC market). Borrowers receive cTokens representing debt and earn COMP rewards.
Interest rates adjust algorithmically based on supply and demand, ensuring transparency and flexibility.
Spark
Built under Sky Protocol’s ecosystem, Spark supports Ethereum and Gnosis Chain. It offers low-cost borrowing for USDS, DAI, ETH, and WBTC using sUSDS or stablecoins as collateral.
Thanks to D3M integration, Spark maintains deep liquidity and attractive rates. SPK token holders govern protocol upgrades and risk parameters.
Morpho
Morpho enhances existing lending markets with peer-to-peer matching on Ethereum and Base. With over 190 custom markets, it enables high loan-to-value (LTV) ratios and optional protocol fees.
Its MetaMorpho vaults offer managed liquidity solutions, while free flash loans support advanced arbitrage strategies.
Kamino (Solana)
As Solana’s leading lending protocol, Kamino supports high-leverage strategies through Multiply Vaults (up to 10x) and eMode (95% LTV for correlated pairs like SOL/jitoSOL).
It also includes built-in protections like auto-deleveraging and scam token detection—critical in Solana’s fast-moving ecosystem.
How to Get a DeFi Loan: Step-by-Step
Taking out a DeFi loan is straightforward:
- Set up a Web3 wallet (e.g., MetaMask or Phantom)
- Connect to a supported DeFi platform
- Deposit eligible collateral (e.g., ETH, WBTC, SOL)
- Borrow your desired asset (e.g., USDC, DAI)
No KYC or credit checks are required—just overcollateralization to secure the loan.
👉 Learn how to start borrowing crypto with minimal fees and maximum flexibility.
Understanding Leverage and Loan-to-Value (LTV)
Most DeFi loans require overcollateralization, meaning you must deposit more value than you borrow. Common thresholds:
- Minimum collateral ratio: 110%
- Maximum LTV: Typically 60–95%, depending on asset stability
For instance:
- Deposit $1,000 worth of ETH → Borrow up to $600 (60% LTV)
- If ETH value drops sharply, you risk liquidation
Some platforms offer “eMode” (efficient mode), boosting LTV for correlated assets like staked and native tokens.
What Are Flash Loans?
Flash loans are uncollateralized loans that must be borrowed and repaid within a single blockchain transaction.
- No collateral required
- Repayment must occur in one block
- Fee: 0–0.05%
They’re commonly used for:
- Arbitrage between exchanges
- Collateral swaps
- Debt refinancing
However, they require smart contract programming skills and are primarily used by developers and advanced traders.
Risks of Borrowing in DeFi
Liquidation Risk
If your collateral value falls below the required threshold, your position may be liquidated automatically—often at a discount.
Smart Contract Risk
Bugs or exploits in code can lead to fund loss. Even audited protocols aren’t immune—Beanstalk and Mango Markets suffered massive hacks despite security measures.
Oracle & Price Feed Risk
Manipulated or delayed price data can trigger incorrect liquidations or allow undercollateralized loans.
Platforms mitigate these risks through audits, bug bounties, and decentralized oracle networks like Chainlink.
Frequently Asked Questions (FAQ)
What is a DeFi loan?
A DeFi loan allows users to borrow digital assets by locking up cryptocurrency as collateral—without intermediaries or identity verification.
Are DeFi loans overcollateralized?
Yes. Most require collateral worth 110% to 200% of the borrowed amount to protect against volatility.
How does borrowing against crypto avoid taxes?
Since no sale occurs, there’s no taxable event—making it ideal for investors holding long-term positions.
What’s the difference between DeFi and traditional loans?
DeFi uses smart contracts and crypto assets; traditional loans involve banks, fiat currency, credit checks, and longer approval times.
Can I borrow crypto without any money?
Yes—via flash loans. But these require technical expertise and must be repaid within one transaction.
Which platform offers the lowest borrowing rates?
As of mid-2025, Aave v3 and Spark offer some of the lowest stablecoin rates due to efficient capital utilization and D3M integration.
👉 Maximize your crypto’s potential—explore seamless borrowing options today.